Why am I receiving error "Employee can't report to anyone below them in the reporting chain" when updating an employee's directly reports to person?

This feature is available on all Deel Local Payroll powered by payspace editions
This error is caused when the company has the below Position Setting activated.
Navigate > Config > Human Resources > Organisation Structure > Org and Position Settings
When the above setting is enabled, an employee cannot be assigned to report to someone who already reports directly to them, thereby preventing a circular reporting relationship.