On Target Earnings

On-target earnings (OTE) is the total compensation a sales rep can expect to earn when they hit 100 percent of their quota. It combines a fixed base salary with variable pay (commission or bonus), so OTE describes target pay, not guaranteed pay: miss quota and you earn less, beat it and you can earn more.

Updated July 2025

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Definition: On Target Earnings

On Target Earnings (OTE) refers to the total potential compensation an employee can earn if they achieve their performance targets, typically consisting of a base salary plus commission or bonuses. In the context of digital marketing and sales automation, OTE is a critical metric used to align employee incentives with company objectives, motivating sales teams to meet or exceed their goals. By clearly delineating how much a salesperson can earn, including both fixed and variable components, businesses can effectively manage talent and drive productivity. OTE is particularly relevant in sales roles where performance is directly linked to revenue generation. It helps organizations forecast payroll expenses more accurately and establish benchmarks for evaluating sales performance. Understanding OTE is essential for crafting competitive compensation packages that attract and retain top talent while ensuring alignment with strategic sales targets.

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How On Target Earnings works

OTE is built from two parts:

Base salary - fixed pay the rep receives regardless of performance.
Variable (commission or bonus) - earned by hitting quota, paid in full at 100 percent attainment.

The split between them is the pay mix, written as base/variable. A 60/40 mix on a 100,000 dollar OTE means 60,000 base and 40,000 variable at target. Closing roles tend to have aggressive mixes (50/50), while roles with less direct control over revenue lean toward more base (70/30 or 80/20). Many plans add accelerators that raise the commission rate once a rep passes quota, so earnings above OTE can climb quickly. OTE is a target, not a floor: it assumes quota is hit.

Real-world examples

An account executive has a 120,000 dollar OTE on a 70/30 mix at first glance, refined to base 80,000 and variable 40,000 (closer to two-thirds base). At 100 percent of quota the rep earns the full 120,000. At 70 percent attainment, they earn the 80,000 base plus roughly 70 percent of the variable, around 28,000, for about 108,000 total.

An SDR has a 70,000 dollar OTE on an 80/20 mix: 56,000 base and 14,000 variable, earned by booking the target number of qualified meetings. If the SDR beats target and an accelerator kicks in, total pay can exceed the 70,000 OTE.

Why On Target Earnings matters in 2026

OTE is the headline number in sales recruiting and the lever that shapes rep behaviour. A well-designed OTE and pay mix attracts the right talent and motivates the actions the company wants, such as new-logo acquisition or expansion. A poorly designed one drives the wrong behaviour or pushes good reps to leave.

For candidates, understanding OTE prevents nasty surprises: a high OTE on an unrealistic quota is worth less than a modest OTE that reps actually hit. For sales leaders, OTE design is where strategy meets motivation, which is why comp plans are reviewed carefully each year.

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Common mistakes

Treating OTE as guaranteed pay. It is target pay at full quota attainment, not a floor.
Pairing OTE with an unrealistic quota. A high OTE means little if almost no one hits the number behind it.
Wrong pay mix for the role. Too much variable on a role with little revenue control demotivates; too little on a closing role caps drive.
No accelerators. Flat commission above quota removes the incentive to overperform.

Frequently asked questions

Is on-target earnings guaranteed?

No. OTE is the total pay a rep earns at 100 percent of quota. The base salary portion is guaranteed, but the variable portion depends on performance. Miss quota and total earnings fall below OTE; beat it, often with accelerators, and they can rise above it.

What is a good pay mix for OTE?

It depends on the role's control over revenue. Closing roles often use 50/50 (base/variable), while roles with less direct control, such as some SDR or customer-facing positions, lean toward 70/30 or 80/20. The more a role directly drives revenue, the more variable the mix tends to be.

What is the difference between OTE and base salary?

Base salary is the fixed pay a rep receives no matter what. OTE is base salary plus the variable pay earned at full quota attainment. OTE is always higher than base, because it includes target commission.

How is OTE calculated?

OTE = base salary + variable pay at 100 percent quota attainment. If a role pays 60,000 base and 40,000 in commission at target, the OTE is 100,000. The ratio between the two parts is the pay mix.