On-target Earnings (OTE)
On-target earnings (OTE) is the total compensation a salesperson can expect to earn if they hit 100% of their quota, combining base salary and target variable pay (commission and bonuses).
Key takeaways
- OTE is the total pay at 100% quota attainment: base salary plus target variable pay.
- The variable portion is at-risk, earned by performing; actual pay falls below OTE on a miss and can exceed it via accelerators.
- The base/variable split (e.g. 50/50, 60/40) varies by role and the rep's control over outcomes.
- OTE is realized through quota attainment and ties directly to it.
- It is a target, not a guarantee; unrealistic quotas make the OTE fiction.
On-target earnings (OTE) is the total compensation a salesperson can expect to earn if they hit 100% of their quota, combining base salary and target variable pay (commission and bonuses). If a rep has a $70,000 base and $70,000 target commission, their OTE is $140,000. It is the headline number that frames a sales compensation package.
OTE matters because it sets expectations on both sides: it tells the rep what "good" looks like in earnings, and it tells the company what each fully-performing rep costs. Understanding OTE, and how its base and variable split works, is fundamental to designing and evaluating sales comp.
What OTE is
On-target earnings is the expected total pay at 100% quota attainment: base salary plus the variable compensation earned for hitting target. The variable portion is "at risk", earned only by performing, so actual earnings fall below OTE if a rep misses quota and can exceed it (via accelerators) if they overperform. OTE is a target and a planning figure, not a guarantee.
The base/variable split
| Component | Nature |
|---|---|
| Base salary | Fixed, paid regardless of performance |
| Variable (commission/bonus) | At-risk, earned by hitting quota |
| OTE | Base + target variable (at 100% quota) |
The split between base and variable, often expressed as a ratio like 50/50 or 60/40, varies by role. Roles with more control over outcomes (closing reps) tend to have more variable; roles with less direct control (some SDR or support-leaning roles) tend to have more base.
How OTE works in practice
OTE is realized through quota attainment: hit 100% of quota and you earn your full OTE; hit 80% and you earn base plus 80% of target variable (roughly); overperform and accelerators can push earnings above OTE.
This ties OTE directly to quota attainment: the variable portion scales with performance against quota. Well-designed comp sets OTE and quota so that strong-but-realistic performance earns the full OTE, with accelerators rewarding overperformance, keeping the plan both motivating and affordable.
Why OTE matters
- Recruiting. OTE is how comp packages are advertised and compared, central to attracting talent.
- Motivation. A clear, achievable OTE motivates reps toward quota.
- Cost planning. OTE tells the company the cost of each fully-performing rep, feeding capacity planning.
- Plan design. The base/variable split shapes rep behavior and risk tolerance.
Common OTE mistakes and misunderstandings
- Treating OTE as guaranteed. The variable portion is at-risk; OTE is a target, not a floor.
- Unrealistic quotas. If almost no one hits quota, the OTE is fiction and morale suffers.
- Wrong base/variable split. A split mismatched to the role's control over outcomes distorts behavior.
- Ignoring accelerators. Omitting upside for overperformance caps motivation at quota.
On-target earnings is the expected total pay at full quota, base plus target variable, that frames every sales comp package. Understood as a performance-linked target rather than a guarantee, and designed with a sensible base/variable split and achievable quota, OTE aligns what motivates the rep with what the business can afford.
Frequently asked questions
What is on-target earnings (OTE)?
On-target earnings (OTE) is the total compensation a salesperson can expect to earn if they hit 100% of their quota, combining base salary and target variable pay (commission and bonuses). If a rep has a $70,000 base and $70,000 target commission, their OTE is $140,000. It is the headline figure that frames a sales comp package, a target and planning number, not a guarantee.
What is the base/variable split in OTE?
OTE combines a fixed base salary (paid regardless of performance) and at-risk variable pay (commission or bonus earned by hitting quota). The split, often expressed as a ratio like 50/50 or 60/40, varies by role: roles with more control over outcomes (closing reps) tend to have more variable, while roles with less direct control tend to have more base.
How does OTE work in practice?
OTE is realized through quota attainment: hit 100% of quota and you earn your full OTE; hit 80% and you earn base plus roughly 80% of target variable; overperform and accelerators can push earnings above OTE. The variable portion scales with performance against quota, so OTE ties directly to quota attainment.
Why does OTE matter?
Recruiting (OTE is how comp packages are advertised and compared), motivation (a clear, achievable OTE motivates reps toward quota), cost planning (OTE tells the company the cost of each fully-performing rep, feeding capacity planning), and plan design (the base/variable split shapes rep behavior and risk tolerance).
What are common OTE mistakes and misunderstandings?
Treating OTE as guaranteed (the variable portion is at-risk; OTE is a target, not a floor), unrealistic quotas (if almost no one hits quota, the OTE is fiction and morale suffers), the wrong base/variable split (mismatched to the role's control over outcomes), and ignoring accelerators (omitting upside for overperformance caps motivation at quota).
Related terms
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