On Target Earnings

On-Target Earnings (OTE) represents the total potential annual compensation for a role, combining a fixed base salary with the variable commission earned for achieving 100% of performance targets. This figure is used to project a salesperson's total pay if they meet their quota, but it does not typically include discretionary bonuses or other benefits. Therefore, the actual amount earned can be lower if sales goals are not fully met.

OTE is crucial for both companies and sales professionals. It provides a transparent view of potential earnings, which helps attract and retain top talent. For businesses, a well-structured OTE model aids in forecasting compensation costs and sales revenue, aligning employee motivation with company goals.

This is how you calculate on-target earnings.

While both are components of sales compensation, OTE and base salary serve different purposes.

A well-structured OTE plan can be a powerful motivator for sales teams, directly linking performance to financial rewards. However, if mismanaged, it can have the opposite effect, leading to frustration and disengagement.

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