On-Target Earnings Salary

OTE (On-Target Earnings) refers to the total compensation an employee can expect when they meet their performance targets. This is especially common in sales roles. It combines a fixed base salary with variable components like commissions or bonuses, offering a clear picture of the total earning potential.

Including OTE in job descriptions or offer letters helps set clear expectations with candidates. It signals that the figure represents total compensation when goals are met.

For global companies, using OTE can bring consistency to how compensation is communicated across different regions. It also helps align employee incentives with broader business goals. Just keep in mind: OTE isn’t guaranteed: it depends on hitting specific performance targets.

What Are the Benefits of an OTE Salary?

A strong OTE salary brings benefits to both sides of the table. For employees, it creates transparency: they know exactly how their performance connects to their paycheck. For employers, it creates discipline: variable pay scales with results, keeping payroll sustainable. Let's unpack the benefits associated with OTE Salary more:

• Clarity for employees: When a rep earns their OTE by meeting 100% of their quota, they understand exactly how effort translates into reward. That clarity motivates sales teams and attracts ambitious talent.
• Cost control for employers: OTE keeps fixed payroll predictable. Because base salary and commission are balanced through pay mix, companies only pay more when revenue grows.
• Performance culture: Clear salary OTE definition builds trust. Reps see that if they deliver, they’re rewarded. That encourages healthier pipelines, higher deal quality, and better teamwork.‍
• Global consistency: For multinational employers, OTE is a useful framework. It standardizes expectations while adapting to local laws and cultural norms. This is essential when managing diverse, cross-border sales teams.
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Examples of Positions with OTE Compensation

OTE shows up most often in sales roles where results are more objectively measurable, but it can also extend to leadership and marketing. Here’s how OTE works in practice:

Account Executive (SaaS)

In U.S. SaaS environments, Account Executives often target six-figure OTEs. According to the latest benchmarks, the median base salary is $100,000, and median OTE is $185,000.

This means that if an AE meets 100% of their sales quota, they’d earn an additional $85,000 in commission, bringing their total compensation to $185,000.

In enterprise roles, especially in markets like New York and San Francisco, these OTEs trend even higher, due to larger deal sizes and longer sales cycles.

Business Development Manager

A Business Development Manager (BDM) blends base salary with commission tied to new client or partnership wins.

Sales Development Representative (SDR)

SDRs typically earn a base salary supplemented with bonuses or commission for generating pipeline or qualified meetings. In the U.S., current data suggests OTEs fall between $79K-$126K per year ( $50K-$71K base pay and $30K -$55K additional pay), while in Western European countries like Germany, the base salary ranges around €29K -€52K with commission of €6k - €14k and bonus of €1K - €15K.

These figures reflect a “base + bonus” structure tailored to activity-based performance.

Sales Manager

Sales Managers earn compensation that combines base salary with team-based bonuses or overrides on collective performance.

Marketing Director

For Marketing Directors, OTE consists of a competitive base salary plus bonuses tied to performance KPIs such as market expansion or revenue growth. In the U.S., typical OTEs sit between $179,655–$209,133 , aligned with leadership-level impact.

Capped vs. Uncapped OTE

Some teams limit total commission (“capped”); others let earnings run (“uncapped”). We explore both below, but it’s best to use the model that fits your stage and risk tolerance. For example, globally, uncapped may appeal more in high-growth regions like Asia.

✍️The Playbook

Many companies use a hybrid—capped commission with accelerators (higher commission rates after 100% of their quota). This balances financial control with employee motivation.

How Do You Calculate OTE?

The formula is simple:

OTE = Base Salary + Target Commission at 100% of their quota

1. Find the base salary: This is the fixed pay the employee gets, no matter what.
2. Determine the variable pay (commission/bonus): Figure out how much the person will earn if they hit all their goals (includes commissions, bonuses, etc.)
3. Add them together: OTE = Base Salary + Variable Pay (that gives you the total expected payout if targets are met).
4. (Optional) Add other incentives: If there are extra bonuses, like for special achievements or perks, include those in the variable pay as well.

💰 Example Calculation

Take an account executive on a $60,000 base with 10% sales commission on a $500,000 annual sales quota, who has a target commission of $50,000. OTE = $60,000 + $50,000 = $110,000. If they hit 100 consistently, they’ll earn the full OTE across the year.

What is the Average OTE for a Sales Rep Role?

There’s no single “global” OTE. It varies by role, market, and model. Here's some examples:

• U.S. Account Executives: 2025 salary snapshots show median OTE at $185,000, with averages across sales roles at $174,000. Treat these benchmarks as context, not gospel. ‍
• UK Field Sales: Typical base salary is around £38,843 according to Indeed. OTE in this role often sits higher after accounting for performance-based pay.

What Determines OTE?

Several interlocking factors shape how On‑Target Earnings (OTE) work in practice. Let’s explore each dimension in more detail:

1. Industry & Sales Cycle Complexity

The nature of the industry and the complexity of the sales process directly influence OTE design. Longer, enterprise-level sales cycles, common in technology, healthcare, or industrial sectors, involve multiple stakeholders, extended negotiation, and higher deal sizes. These justify a higher OTE with a larger base and variable pay balance.

On the other hand, high-velocity sales environments, like SMB SaaS or consumer goods, feature shorter cycles and smaller deal sizes. Here, pay models tend to skew more variable, with leaner OTEs based on frequent sales.

2. Pay Mix (Base vs. Variable)

Pay mix is how OTE is split between base salary and variable pay (commission or bonuses). Determining this balance is crucial for motivation, cost control, and alignment with organizational strategy.

Common pay mixes include:

• 50/50: Often seen in SaaS Account Executives; a balanced blend of stability and incentive.
• 60/40 or 70/30: Used in markets favoring income stability, such as Europe or for support roles.
• 80/20 or higher base-heavy: Typical for roles with longer ramp time or high non-sales responsibilities.

3. Sales Quota & Targets

Quotas must align with realistic attainment potentials. The common "quota-to-OTE" ratio in SaaS is around 4.2×, meaning an AE with $100K OTE should have a approximately a $420K quota.

If quotas are inflated or misaligned with market realities, OTE becomes aspirational rather than achievable. This invariably leads to demotivation and high turnover.

4. Role Level & Experience

Senior positions, like Enterprise AEs, Sales Managers, or Marketing Directors, deliver more strategic or complex contributions. These roles typically come with higher OTEs to reflect deeper ownership and higher impact.

Entry-level or SDR roles, with lower responsibility but important pipeline influence, tend to have smaller OTEs and more base-heavy structures.

5. Market Benchmarks & Competitive Landscape

To attract and retain top talent, compensation plans must align with market standards. If pay packages fall well below industry norms, employers risk losing talent to competitors.

Benchmarking also ensures internal fairness across roles and geographies, which helps build trust and manage expectations transparently.
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Key Definitions

🥧Pay mix: Pay mix is the portion of total compensation divided between base salary and variable pay like commissions or bonuses. For example, a 60/40 pay mix means 60% of an employee's earnings are guaranteed (base), while 40% depend on performance.

🎯On-Target Commission (OTC): On-Target Commission (OTC) refers to the variable portion of OTE that employees would earn if they meet 100% of their sales quota. It represents the "at-target" bonus component in their compensation plan.

⏳Ramp time: Ramp time is the period from a new hire’s start date until they consistently reach full productivity and begin hitting their sales targets. It can also be used to forecast when new reps will start contributing revenue.

⬆️/⬇️Accelerators & Decelerators: Accelerators increase commission rates for sales made beyond quota to reward overachievement, while decelerators reduce commission rates for sales below the target threshold.

Key Considerations for Employers Designing OTE Salary Plans

• Set achievable quotas (and show your math): Nearly 9 out of 10 sales teams say they’re having a hard time hitting quota, with many pointing to tough economic conditions as a major factor. If your targets require superhuman effort to achieve, you risk losing the trust of your team – and possibly your top performers. To build confidence and show transparency, consider sharing last year’s quota attainment data so everyone understands the context behind your goals.‍
• Factor in fair ramp time for new hires: Recognizing ramp time (which is often months) is key. Without a fair ramp, new hires may fail early, damaging morale and retention. Include structured onboarding support, like reduced quotas or base guarantees to protect reps.
• Keep comp plans simple enough to explain in 90 seconds: Overly complex plans confuse reps and frustrate managers. The best-performing companies ensure their teams can articulate OTE structure clearly to ensure understanding and trust.‍
• Review quarterly, recalibrate annually: Salesforce data shows 72% of reps don’t expect to meet annual quotas. With shifting markets and macroeconomic forces, OTE plans need frequent reviews and annual refreshes to stay in lock-step with market changes.

How To Set Up Your OTE Model

1. Define the role and motion (e.g., new-logo hunting vs. expansion): Start by clarifying whether this role focuses on bringing in new business, growing existing accounts, or supporting other functions. Clear definitions help determine appropriate quotas, sales cycle expectations, and compensation structure.
2. Decide on pay mix (e.g., 50/50 base vs. commission): Align pay structure with the role’s predictability and risk level. For example, 50/50 works well for standard AE roles in SaaS, whereas more complex, long-cycle roles may benefit from more base-heavy mixes like 60/40.
3. Calculate OTE using deal size, win rates, and margin: Be sure to use actual performance data (average deal value, conversion rates, and sales cycle length) to determine realistic target commissions and OTE. Baseless OTEs reek of unbelievability and can demotivate reps. 
4.  Publish clear rules: Ensure the plan includes transparent mechanics. Clarify when accelerators kick in, whether variable pay is capped, and under what scenario clawbacks apply. This is a sure-fire way to enhance trust and reduce disputes with employees.
5. Pressure-test model at 80%, 100%, and 120% quota levels: Run simulations across performance tiers to ensure payouts remain financially viable and performance is appropriately rewarded (even in variability).‍
6. Factor in the global compensation context: multinational teams should adjust OTE for cost of living, regulatory differences (e.g., mandatory benefits), and local pay norms in order to create a fair, consistent framework across countries.

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OTE Salary FAQs

What is OTE salary?

OTE (On-Target Earnings) represents the total compensation an employee can expect to receive in a year if they hit 100% of their performance targets. It combines a fixed base salary with variable pay like commissions or bonuses.

Does OTE include base salary?

Yes, OTE includes the base salary plus any additional variable pay tied to performance, such as commission or bonus.

How does OTE salary work?

OTE works by setting a target pay that combines base salary and expected variable earnings, so an employee earns the full amount by meeting sales quota; earnings vary based on performance.

How to calculate OTE salary?

You calculate OTE by adding the base salary to the commission or bonus they would earn at 100% of their quota (OTE = base salary + target commission).

What’s the difference between OTE and a bonus?

OTE (On-Target Earnings) includes your base salary plus the commissions or performance-based pay you’ll earn if you hit your targets—making it a planned part of your compensation model. A bonus, on the other hand, is usually a discretionary or reactive reward (such as for loyalty, end-of-year performance, or a special achievement) and may not be directly tied to specific quota-based goals.

ABOUT THE AUTHOR

Milani Notshe

Milani is a seasoned research and content specialist at Playroll, a leading Employer Of Record (EOR) provider. Backed by a strong background in Politics, Philosophy and Economics, she specializes in identifying emerging compliance and global HR trends to keep employers up to date on the global employment landscape.