What Does OTE Stand For? On-Target Earnings, Explained
Let’s cut through the noise. When you see “OTE” on a job description, it stands for On-Target Earnings. It’s the total compensation you can expect to earn in a year if you meet 100% of your sales quota. Think of it as your potential annual income, not your guaranteed salary.
It’s a simple concept that often gets twisted into a pretzel of corporate jargon and wishful thinking. So, let’s untwist it.
The Quick and Dirty Definition
For everyone scanning this between calls, here’s the bottom line:
On-Target Earnings (OTE) is the sum of your annual base salary and the total commission you’d earn by hitting your sales targets for the year.
The formula is straightforward: OTE = Base Salary + On-Target Commission. That’s it. No magic, no mystery. It's the number that represents your earning potential if you perform as expected.
OTE in a Job Offer: What to Look For
Seeing a big OTE number is exciting. But before you start shopping for a new car, you need to play detective. A great OTE on paper means nothing if it’s not achievable.
Here’s what to scrutinize in a job offer:
The Pay Mix: What’s the split between base salary and variable commission? A common split for Account Executives is 50/50 ($100k base, $100k commission for a $200k OTE). For SDRs, it might be closer to 70/30. A low base salary puts all the risk on you.
Quota Attainment Rate: This is the most important question to ask. “What percentage of the sales team is currently hitting or exceeding their quota?” If the answer is less than 70%, that big OTE number is more of a suggestion than a reality. It’s a major red flag if they won’t share this data.
Commission Structure: How is commission actually paid out? Is there an accelerator for over-performance? Is it capped? Are there clawbacks? Understand the fine print before you sign.
Ramp-Up Time: Ask about the ramp-up period. A good company will offer a guaranteed commission or a reduced quota for the first 3-6 months while you learn the ropes and build your pipeline.
How to Calculate Your OTE (Stop Guessing)
You don’t need a degree in finance to figure this out. The math behind OTE is surprisingly simple. It’s about understanding the two core components of your pay.
The Simple OTE Formula
Let’s break it down. Your OTE is built from two pieces:
Base Salary: This is the guaranteed portion of your income. It’s what you get paid no matter what. It provides stability.
On-Target Commission: This is the variable portion, also known as your “at-risk” pay. You earn this by hitting your sales targets. This provides the incentive.
So, if a company offers you an OTE of $150,000 with a 50/50 split, it means:
Your Base Salary is $75,000.
Your On-Target Commission is $75,000.
To earn that $75,000 in commission, you’ll need to hit a specific quota. For example, if your commission rate is 10% of the deal value, you’d need to close $750,000 in new business to hit your target.
OTE in the Wild: Real-World Sales Examples
OTE isn't one-size-fits-all. It varies dramatically based on your role, industry, and experience. Let's look at a few common scenarios.
OTE for an Account Executive (AE)
AEs are the closers, so their compensation is heavily tied to performance. A 50/50 pay mix is the industry standard. For a deeper dive into the differences between Account Executives and SDRs, and how their collaboration impacts sales performance, check out this guide on optimizing AE & SDR collaboration.
Base Salary: $80,000
On-Target Commission: $80,000
Total OTE: $160,000
The Catch: To earn that $80k in commission, the AE might need to hit an annual quota of $800,000. Their ability to earn this depends entirely on the quality of leads in their pipeline.
OTE for a Sales Development Rep (SDR)
SDRs are focused on top-of-funnel activities like booking meetings, so their pay mix is usually less aggressive. A 70/30 or 60/40 split is common. If you want to understand how SDRs fit into the broader sales team structure and how their roles differ from AEs and BDRs, see this practical guide to improving sales team performance.
Base Salary: $55,000
On-Target Commission/Bonus: $25,000
Total OTE: $80,000
The Catch: The $25k commission is tied to hitting specific activity metrics, like booking a certain number of qualified meetings per month. It's less about closing deals and more about creating opportunities.
OTE for a Sales Manager
A Sales Manager's OTE is tied to the performance of their entire team. Their variable pay is often an “override” or bonus based on the team hitting its collective quota.
Base Salary: $120,000
On-Target Bonus: $60,000
Total OTE: $180,000
The Catch: The manager only gets their full bonus if the team as a whole achieves 100% of its target. This incentivizes them to coach, train, and support every rep.
Capped vs. Uncapped OTE: The Million-Dollar Question
This is where things get interesting. The difference between a capped and uncapped plan can be the difference between a good year and a life-changing one.
The Pros and Cons of Capped OTE
A capped OTE means there’s a ceiling on how much commission you can earn. Once you hit a certain percentage of your quota (say, 150%), you stop earning more commission. It sounds terrible, and for high-performing AEs, it usually is.
So why do companies do it? Sometimes it’s for budgeting predictability. Other times, it’s a sign of an outdated compensation philosophy. A capped plan can demotivate your best reps, encouraging them to sandbag deals until the next quarter once they’ve hit their cap.
The Pros and Cons of Uncapped OTE
An uncapped OTE is the dream for every ambitious salesperson. It means your earning potential is limitless. If you crush your quota and bring in 200% or 300% of your number, your commission check reflects that. Many plans even include accelerators, where your commission rate actually increases after you hit 100% of your quota.
The reality check? An uncapped plan is only as good as the territory, product, and lead flow supporting it. Limitless potential doesn't mean much if the quota is impossible to begin with.
OTE Around the World: US vs. UK vs. AU
Sales compensation isn’t a global standard. What’s typical in Silicon Valley is different from what you’ll find in London or Sydney. Here's a high-level look:
United States: The US market, particularly in tech, is known for high OTEs and aggressive 50/50 pay mixes. The culture often rewards high-risk, high-reward performance, making uncapped plans with accelerators the gold standard for top talent.
United Kingdom: In the UK, compensation plans tend to be a bit more conservative. You’ll often see a higher base salary component, with pay mixes closer to 60/40 or 70/30. While OTEs are competitive, the emphasis is often on providing more stability through the base salary.
Australia: The Australian market is similar to the UK, with a strong focus on the base salary. A key difference is the mandatory superannuation (pension contribution), which adds another layer to the total compensation package. Pay mixes often lean toward a 70/30 split.
Why OTE Matters for Modern Sales Teams
Let’s be honest: OTE isn’t just a number on a spreadsheet. It’s the engine of a sales team. A well-structured, transparent, and achievable OTE plan is one of the most powerful motivators you have. A confusing or unrealistic one is the fastest way to kill morale and drive away top talent.
We believe that the best sales teams are built on clarity and empowerment. Your reps should know exactly how they make money and have a clear path to hitting their number. When incentives are aligned, everyone wins—the rep, the manager, and the company.
But a great comp plan is only half the battle. Motivation plummets when reps are starved for quality leads.
How Topo Helps Teams Crush Their Quotas (and OTE)
A great OTE is only motivating if your team can actually hit it. That means having a full pipeline of qualified leads who are ready to talk. If your AEs are spending half their day prospecting instead of selling, they’re not closing deals—and they’re not getting close to their OTE. For actionable strategies to improve your close rates and overcome common sales challenges, see these proven tips to close deals successfully.
This is where Topo comes in. Our AI agents automate the entire top of the sales funnel. They identify high-value buying signals, find prospects that match your ICP, enrich their data, and run personalized outreach campaigns across multiple channels. To learn more about building a quality pipeline and the fundamentals of B2B prospecting, check out B2B Prospecting 101: ICP, Signals, and Strategy.
By the time a lead gets to your sales team, it’s already been qualified and warmed up. This frees up your AEs to do what they do best: build relationships, run demos, and close deals. More at-bats with the right prospects means more wins, higher quota attainment, and happier reps blowing past their OTE.
Clarity around OTE is power. It empowers sales reps to negotiate better offers and bet on themselves. It empowers sales leaders to build compensation plans that attract top talent and drive the right behaviors. Stop treating OTE like a mystery and start using it as the strategic tool it is.
What Does OTE Stand For? On-Target Earnings, Explained
Let’s cut through the noise. When you see “OTE” on a job description, it stands for On-Target Earnings. It’s the total compensation you can expect to earn in a year if you meet 100% of your sales quota. Think of it as your potential annual income, not your guaranteed salary.
It’s a simple concept that often gets twisted into a pretzel of corporate jargon and wishful thinking. So, let’s untwist it.
The Quick and Dirty Definition
For everyone scanning this between calls, here’s the bottom line:
On-Target Earnings (OTE) is the sum of your annual base salary and the total commission you’d earn by hitting your sales targets for the year.
The formula is straightforward: OTE = Base Salary + On-Target Commission. That’s it. No magic, no mystery. It's the number that represents your earning potential if you perform as expected.
OTE in a Job Offer: What to Look For
Seeing a big OTE number is exciting. But before you start shopping for a new car, you need to play detective. A great OTE on paper means nothing if it’s not achievable.
Here’s what to scrutinize in a job offer:
The Pay Mix: What’s the split between base salary and variable commission? A common split for Account Executives is 50/50 ($100k base, $100k commission for a $200k OTE). For SDRs, it might be closer to 70/30. A low base salary puts all the risk on you.
Quota Attainment Rate: This is the most important question to ask. “What percentage of the sales team is currently hitting or exceeding their quota?” If the answer is less than 70%, that big OTE number is more of a suggestion than a reality. It’s a major red flag if they won’t share this data.
Commission Structure: How is commission actually paid out? Is there an accelerator for over-performance? Is it capped? Are there clawbacks? Understand the fine print before you sign.
Ramp-Up Time: Ask about the ramp-up period. A good company will offer a guaranteed commission or a reduced quota for the first 3-6 months while you learn the ropes and build your pipeline.
How to Calculate Your OTE (Stop Guessing)
You don’t need a degree in finance to figure this out. The math behind OTE is surprisingly simple. It’s about understanding the two core components of your pay.
The Simple OTE Formula
Let’s break it down. Your OTE is built from two pieces:
Base Salary: This is the guaranteed portion of your income. It’s what you get paid no matter what. It provides stability.
On-Target Commission: This is the variable portion, also known as your “at-risk” pay. You earn this by hitting your sales targets. This provides the incentive.
So, if a company offers you an OTE of $150,000 with a 50/50 split, it means:
Your Base Salary is $75,000.
Your On-Target Commission is $75,000.
To earn that $75,000 in commission, you’ll need to hit a specific quota. For example, if your commission rate is 10% of the deal value, you’d need to close $750,000 in new business to hit your target.
OTE in the Wild: Real-World Sales Examples
OTE isn't one-size-fits-all. It varies dramatically based on your role, industry, and experience. Let's look at a few common scenarios.
OTE for an Account Executive (AE)
AEs are the closers, so their compensation is heavily tied to performance. A 50/50 pay mix is the industry standard. For a deeper dive into the differences between Account Executives and SDRs, and how their collaboration impacts sales performance, check out this guide on optimizing AE & SDR collaboration.
Base Salary: $80,000
On-Target Commission: $80,000
Total OTE: $160,000
The Catch: To earn that $80k in commission, the AE might need to hit an annual quota of $800,000. Their ability to earn this depends entirely on the quality of leads in their pipeline.
OTE for a Sales Development Rep (SDR)
SDRs are focused on top-of-funnel activities like booking meetings, so their pay mix is usually less aggressive. A 70/30 or 60/40 split is common. If you want to understand how SDRs fit into the broader sales team structure and how their roles differ from AEs and BDRs, see this practical guide to improving sales team performance.
Base Salary: $55,000
On-Target Commission/Bonus: $25,000
Total OTE: $80,000
The Catch: The $25k commission is tied to hitting specific activity metrics, like booking a certain number of qualified meetings per month. It's less about closing deals and more about creating opportunities.
OTE for a Sales Manager
A Sales Manager's OTE is tied to the performance of their entire team. Their variable pay is often an “override” or bonus based on the team hitting its collective quota.
Base Salary: $120,000
On-Target Bonus: $60,000
Total OTE: $180,000
The Catch: The manager only gets their full bonus if the team as a whole achieves 100% of its target. This incentivizes them to coach, train, and support every rep.
Capped vs. Uncapped OTE: The Million-Dollar Question
This is where things get interesting. The difference between a capped and uncapped plan can be the difference between a good year and a life-changing one.
The Pros and Cons of Capped OTE
A capped OTE means there’s a ceiling on how much commission you can earn. Once you hit a certain percentage of your quota (say, 150%), you stop earning more commission. It sounds terrible, and for high-performing AEs, it usually is.
So why do companies do it? Sometimes it’s for budgeting predictability. Other times, it’s a sign of an outdated compensation philosophy. A capped plan can demotivate your best reps, encouraging them to sandbag deals until the next quarter once they’ve hit their cap.
The Pros and Cons of Uncapped OTE
An uncapped OTE is the dream for every ambitious salesperson. It means your earning potential is limitless. If you crush your quota and bring in 200% or 300% of your number, your commission check reflects that. Many plans even include accelerators, where your commission rate actually increases after you hit 100% of your quota.
The reality check? An uncapped plan is only as good as the territory, product, and lead flow supporting it. Limitless potential doesn't mean much if the quota is impossible to begin with.
OTE Around the World: US vs. UK vs. AU
Sales compensation isn’t a global standard. What’s typical in Silicon Valley is different from what you’ll find in London or Sydney. Here's a high-level look:
United States: The US market, particularly in tech, is known for high OTEs and aggressive 50/50 pay mixes. The culture often rewards high-risk, high-reward performance, making uncapped plans with accelerators the gold standard for top talent.
United Kingdom: In the UK, compensation plans tend to be a bit more conservative. You’ll often see a higher base salary component, with pay mixes closer to 60/40 or 70/30. While OTEs are competitive, the emphasis is often on providing more stability through the base salary.
Australia: The Australian market is similar to the UK, with a strong focus on the base salary. A key difference is the mandatory superannuation (pension contribution), which adds another layer to the total compensation package. Pay mixes often lean toward a 70/30 split.
Why OTE Matters for Modern Sales Teams
Let’s be honest: OTE isn’t just a number on a spreadsheet. It’s the engine of a sales team. A well-structured, transparent, and achievable OTE plan is one of the most powerful motivators you have. A confusing or unrealistic one is the fastest way to kill morale and drive away top talent.
We believe that the best sales teams are built on clarity and empowerment. Your reps should know exactly how they make money and have a clear path to hitting their number. When incentives are aligned, everyone wins—the rep, the manager, and the company.
But a great comp plan is only half the battle. Motivation plummets when reps are starved for quality leads.
How Topo Helps Teams Crush Their Quotas (and OTE)
A great OTE is only motivating if your team can actually hit it. That means having a full pipeline of qualified leads who are ready to talk. If your AEs are spending half their day prospecting instead of selling, they’re not closing deals—and they’re not getting close to their OTE. For actionable strategies to improve your close rates and overcome common sales challenges, see these proven tips to close deals successfully.
This is where Topo comes in. Our AI agents automate the entire top of the sales funnel. They identify high-value buying signals, find prospects that match your ICP, enrich their data, and run personalized outreach campaigns across multiple channels. To learn more about building a quality pipeline and the fundamentals of B2B prospecting, check out B2B Prospecting 101: ICP, Signals, and Strategy.
By the time a lead gets to your sales team, it’s already been qualified and warmed up. This frees up your AEs to do what they do best: build relationships, run demos, and close deals. More at-bats with the right prospects means more wins, higher quota attainment, and happier reps blowing past their OTE.
Clarity around OTE is power. It empowers sales reps to negotiate better offers and bet on themselves. It empowers sales leaders to build compensation plans that attract top talent and drive the right behaviors. Stop treating OTE like a mystery and start using it as the strategic tool it is.
FAQ
Is OTE a guaranteed salary?
Not a chance. OTE is your total potential pay, not your guaranteed pay. It’s made of two parts: your fixed base salary (the guaranteed part) and your on-target commission (the part you earn by hitting 100% of your quota). Think of the base as what you're paid to show up, and the commission as what you're paid to win.
Is OTE a guaranteed salary?
Not a chance. OTE is your total potential pay, not your guaranteed pay. It’s made of two parts: your fixed base salary (the guaranteed part) and your on-target commission (the part you earn by hitting 100% of your quota). Think of the base as what you're paid to show up, and the commission as what you're paid to win.
Is OTE a guaranteed salary?
Not a chance. OTE is your total potential pay, not your guaranteed pay. It’s made of two parts: your fixed base salary (the guaranteed part) and your on-target commission (the part you earn by hitting 100% of your quota). Think of the base as what you're paid to show up, and the commission as what you're paid to win.
Is OTE a guaranteed salary?
Not a chance. OTE is your total potential pay, not your guaranteed pay. It’s made of two parts: your fixed base salary (the guaranteed part) and your on-target commission (the part you earn by hitting 100% of your quota). Think of the base as what you're paid to show up, and the commission as what you're paid to win.
What’s the difference between OTE, bonus, and commission?
OTE (On-Target Earnings) is the big picture: Base Salary + On-Target Commission. Commission is the variable portion of your OTE, tied directly to hitting your sales quota. A bonus is usually a separate kicker, often discretionary or tied to goals outside your individual quota, like team performance or a company-wide milestone.
What’s the difference between OTE, bonus, and commission?
OTE (On-Target Earnings) is the big picture: Base Salary + On-Target Commission. Commission is the variable portion of your OTE, tied directly to hitting your sales quota. A bonus is usually a separate kicker, often discretionary or tied to goals outside your individual quota, like team performance or a company-wide milestone.
What’s the difference between OTE, bonus, and commission?
OTE (On-Target Earnings) is the big picture: Base Salary + On-Target Commission. Commission is the variable portion of your OTE, tied directly to hitting your sales quota. A bonus is usually a separate kicker, often discretionary or tied to goals outside your individual quota, like team performance or a company-wide milestone.
What’s the difference between OTE, bonus, and commission?
OTE (On-Target Earnings) is the big picture: Base Salary + On-Target Commission. Commission is the variable portion of your OTE, tied directly to hitting your sales quota. A bonus is usually a separate kicker, often discretionary or tied to goals outside your individual quota, like team performance or a company-wide milestone.
How do I know if an OTE is realistic?
A big OTE number is worthless if no one can hit it. To see if it's realistic, ask tough questions. What percentage of the sales team is currently at or above quota? What’s the average tenure of an AE? A realistic OTE is backed by a solid product, a clear path to quota, and a history of reps actually achieving their targets.
How do I know if an OTE is realistic?
A big OTE number is worthless if no one can hit it. To see if it's realistic, ask tough questions. What percentage of the sales team is currently at or above quota? What’s the average tenure of an AE? A realistic OTE is backed by a solid product, a clear path to quota, and a history of reps actually achieving their targets.
How do I know if an OTE is realistic?
A big OTE number is worthless if no one can hit it. To see if it's realistic, ask tough questions. What percentage of the sales team is currently at or above quota? What’s the average tenure of an AE? A realistic OTE is backed by a solid product, a clear path to quota, and a history of reps actually achieving their targets.
How do I know if an OTE is realistic?
A big OTE number is worthless if no one can hit it. To see if it's realistic, ask tough questions. What percentage of the sales team is currently at or above quota? What’s the average tenure of an AE? A realistic OTE is backed by a solid product, a clear path to quota, and a history of reps actually achieving their targets.
What is a typical pay mix for a sales role?
A common pay mix is 50/50, meaning 50% of your OTE is base salary and 50% is on-target commission. For example, a $120k OTE would have a $60k base and $60k in potential commission. This can vary by role, with SDRs sometimes having a 60/40 or 70/30 split (higher base) and senior AEs having a 50/50 or even 40/60 split (higher variable).
What is a typical pay mix for a sales role?
A common pay mix is 50/50, meaning 50% of your OTE is base salary and 50% is on-target commission. For example, a $120k OTE would have a $60k base and $60k in potential commission. This can vary by role, with SDRs sometimes having a 60/40 or 70/30 split (higher base) and senior AEs having a 50/50 or even 40/60 split (higher variable).
What is a typical pay mix for a sales role?
A common pay mix is 50/50, meaning 50% of your OTE is base salary and 50% is on-target commission. For example, a $120k OTE would have a $60k base and $60k in potential commission. This can vary by role, with SDRs sometimes having a 60/40 or 70/30 split (higher base) and senior AEs having a 50/50 or even 40/60 split (higher variable).
What is a typical pay mix for a sales role?
A common pay mix is 50/50, meaning 50% of your OTE is base salary and 50% is on-target commission. For example, a $120k OTE would have a $60k base and $60k in potential commission. This can vary by role, with SDRs sometimes having a 60/40 or 70/30 split (higher base) and senior AEs having a 50/50 or even 40/60 split (higher variable).
Sources and references
Topo editorial line asks its authors to use sources to support their work. These can include original reporting, articles, white papers, product data, benchmarks and interviews with industry experts. We prioritize primary sources and authoritative references to ensure accuracy and credibility in all content related to B2B marketing, lead generation, and sales strategies.
Sources and references for this article
Sources and references
Topo editorial line asks its authors to use sources to support their work. These can include original reporting, articles, white papers, product data, benchmarks and interviews with industry experts. We prioritize primary sources and authoritative references to ensure accuracy and credibility in all content related to B2B marketing, lead generation, and sales strategies.
Sources and references for this article
Sources and references
Topo editorial line asks its authors to use sources to support their work. These can include original reporting, articles, white papers, product data, benchmarks and interviews with industry experts. We prioritize primary sources and authoritative references to ensure accuracy and credibility in all content related to B2B marketing, lead generation, and sales strategies.
Sources and references for this article
Sources and references
Topo editorial line asks its authors to use sources to support their work. These can include original reporting, articles, white papers, product data, benchmarks and interviews with industry experts. We prioritize primary sources and authoritative references to ensure accuracy and credibility in all content related to B2B marketing, lead generation, and sales strategies.
Sources and references for this article