Re: NPCs won't level up?
Go to their skill trees (up/down on the D-pad). If you see skill points then you need to go in and assign the points to the skills. Note: You do not add points to attributes (e.g. health, dexterity, etc).
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Once you figure that part out there is an option to let them autolevel. I left mine off to micromanage but it will grow more tempting as I gain companions I am sure.
