What is OTE (On-Target Earnings)?
Definition: OTE (On-Target Earnings) is the total annual compensation a salesperson or recruiter can expect to earn when achieving 100% of their sales quota or performance targets, combining base salary with commission or bonus pay.
Also known as: On-Target Earnings, On Target Earnings, Target Earnings
Quick Summary
TL;DROTE (On-Target Earnings) represents total expected annual compensation when a salesperson or recruiter meets 100% of their quota. It combines base salary plus commission/bonus at target performance. If a job lists '$80K OTE,' that's what you'd earn hitting all targets—not guaranteed pay.
Key Facts
OTE Formula
Base Salary + Variable Pay
Compensation structure
Typical Split
60/40 to 70/30 base/variable
Sales compensation data
Common Roles
Sales, Recruiting, BDR
Industry usage
Key Point
Not guaranteed income
Compensation reality
Why OTE Matters in Recruiting
OTE is one of the most misunderstood compensation terms. Job seekers often confuse OTE with guaranteed salary, leading to disappointment when paychecks don't match expectations. Recruiters need to clearly explain OTE to candidates, and staffing agencies must accurately represent compensation in job postings. Misrepresenting OTE damages trust and increases turnover when new hires feel misled about their earning potential.
Common Pain Points
- 1Candidates confusing OTE with guaranteed base salary
- 2Unclear commission structures making OTE unrealistic
- 3Job postings that inflate OTE without explaining attainment rates
- 4Difficulty comparing offers with different OTE structures
How to Understand and Present OTE
Break down OTE into its components for clarity.
- 1
Identify Base Salary
The guaranteed portion paid regardless of performance. This is your floor—what you'll earn even at 0% quota.
- 2
Understand Variable Component
Commission, bonus, or incentive pay tied to performance. Calculate what percentage of OTE this represents.
- 3
Research Quota Attainment
Ask what percentage of the team hits 100% quota. If only 20% hit target, OTE is optimistic for most.
- 4
Calculate Realistic Earnings
Multiply variable by realistic attainment percentage. Add to base for expected actual compensation.
Result
Understanding OTE components helps candidates make informed decisions and helps recruiters set accurate expectations.
OTE Deep Dive for Recruiters
OTE Calculation Example
A job with $120K OTE and a 60/40 split means $72K base salary plus $48K variable at 100% quota. If the average rep hits 80% of quota, realistic earnings are $72K + ($48K × 0.80) = $110,400. Always ask about quota attainment rates when evaluating OTE offers.
Common OTE Splits by Role
Different roles have different base/variable ratios. Enterprise sales roles often have 50/50 splits with higher risk/reward. SDR and BDR roles typically have 70/30 or 80/20 splits with more guaranteed income. Recruiting roles vary widely—agency recruiters often have lower base with higher commission potential, while corporate recruiters may have minimal variable pay.
Red Flags in OTE Offers
Watch for unrealistic OTE claims. If a company quotes high OTE but can't share quota attainment data, be cautious. Uncapped commission sounds appealing but matters little if quotas are unattainable. Ask for historical data: what did reps in this role actually earn last year? Top performers? Average performers? Bottom quartile?
Common Misconceptions
- OTE is guaranteed annual salary
- Everyone earning OTE means it's easily achievable
- Higher OTE always means better compensation
- Uncapped OTE means unlimited earning potential in practice
OTE vs Other Compensation Terms
| Term | Meaning | Guaranteed? | Common In |
|---|---|---|---|
| OTE | Base + Variable at target | Partially | Sales, Recruiting |
| Base Salary | Fixed annual pay | Yes | All roles |
| Commission | % of sales/placements | No | Sales, Agency recruiting |
| Bonus | Performance incentive | No | Most roles |
| Total Comp | All compensation forms | Varies | Tech, Executive |
Understanding different pay structures
Related Terms
Frequently Asked Questions
Related Resources
Presenting Candidates Professionally
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