On-target earnings (OTE)
Also known as: OTE, on target earnings
In short
On-target earnings (OTE) is the total annual compensation a salesperson earns when they achieve exactly 100% of their quota. It equals base salary plus the target variable pay, such as commission or bonus.
OTE appears in job postings and offer letters as a way to describe realistic earning potential. It is a target, not a guarantee: actual pay depends on performance against quota and on the plan's rules.
How OTE is calculated
The formula is simple: OTE = base salary + target variable compensation.
Say a role has an OTE of 150,000, split 50/50. The base is 75,000 and the variable is 75,000 earned at full quota attainment. This is an illustrative example, not a market benchmark.
- Base salary: Fixed pay received regardless of results.
- Variable pay: Commission or bonus tied to results such as closed revenue.
- Pay mix: The ratio of base to variable, such as 50/50 or 70/30, often differing by role and deal complexity.
What OTE does not include
- Accelerators: Higher commission rates above quota can push earnings above OTE.
- Equity and benefits: These are usually stated separately.
- Uncapped upside: OTE is the on-quota figure, not a maximum.
Why it matters for GTM teams
For candidates
Ask how many reps hit quota, how quota is set, and when commission is paid. An OTE is only as real as the share of reps who reach it.
For leaders
OTE drives cost of sales. Quota should be set so a typical performer can reach it, otherwise the plan overpromises and attrition rises.
Common mistakes
- Reading OTE as base: New hires sometimes expect the full amount regardless of performance.
- Ignoring plan terms: Clawbacks, caps, and payment timing change what a rep actually takes home.
- Unrealistic quotas: A high OTE with an unreachable quota is a low expected pay.
On-target earnings (OTE) FAQs
What does OTE mean in sales?
OTE stands for on-target earnings. It is the total pay a sales rep earns for hitting 100% of quota, made up of base salary plus target variable compensation such as commission or bonus. It is a target and not a guaranteed amount.
How do you calculate on-target earnings?
Add the base salary to the variable compensation earned at 100% of quota. For instance, a 60,000 base plus 40,000 target commission gives an OTE of 100,000. The figure assumes the rep exactly meets quota, with no accelerators or shortfalls.
Is OTE guaranteed?
No. Only the base salary is guaranteed. The variable portion depends on hitting quota and on the rules of the compensation plan, so a rep can earn below OTE if they miss target, or above it if the plan pays accelerators.
