The benefits of properly using breakage Breakage is applied by imposing reasonable rules to qualify for commissions. If a distributor fails to perform at a desired level, the commission that he would otherwise receive is retained by the company. This allows the company to pay more to other distributors who are meeting or exceeding the desired level of production. In essence, the company withholds commissions for lack of performance and increases the compensation of those performing well. The company can afford to pay more than they could otherwise afford expanding the capacity of the plan to provide incentives for desired behavior.
Breakage can be a win-win deal for both company and distributor.
There are many ways to implement breakage and methods vary according to the type of plan used. For each new recruit, the participants in the bonus pool receive one share of the pool. Breakage is only available when there is a gap between poor performance and desired performance. If you need to set low levels of performance, than offer graduated compensation opportunities for those who are willing to work harder. Low performance requirements produce low performance.