On-target earnings (OTE)

Three letters carry a surprising amount of ambiguity. On-target earnings describes a single point on a curve: pay at exactly 100% attainment. Reps at 80% earn less, reps at 130% earn more, and across a healthy team the median usually sits below the advertised figure, because quotas are typically set so that somewhere between half and two thirds of the team reach them. The number in the job advert is therefore a projection rather than a salary, and reading it as a salary is the most common mistake made with it.

Working one out is simple arithmetic. Add the base salary to the commission and bonus payable at full attainment. A rep on a $72,000 base whose plan pays $48,000 at target has a $120,000 OTE. Running it backwards is more revealing: $48,000 of variable against a $600,000 quota implies an 8% commission rate, and a candidate who does that division learns more about the offer than the advert intended to tell them.

Two packages with the same OTE can be completely different jobs. The split between fixed and variable pay, called the pay mix, decides that. A $120,000 OTE at an 80/20 mix means $96,000 lands whatever happens and $24,000 is at risk. The same $120,000 at 50/50 puts $60,000 at risk. The second job pays far better in a strong year and becomes a genuine problem in a weak one. Anyone comparing two offers on OTE alone is comparing the least informative number on either page.

Mix varies by role in fairly predictable ways. Account executives commonly sit near 50/50 or 60/40 because they control whether a deal closes. Sales development roles, customer success and solutions engineers usually carry a higher fixed share, often 70/30 or 80/20, because their influence over any single outcome is partial. A mix that looks unusual for the role is worth asking about: an 80/20 account executive job has quietly become a salaried position with a bonus, and a 50/50 customer success job has quietly transferred a risk the person cannot manage.

Guaranteed commission during a ramp complicates the first year in the opposite direction. A new rep on a six-month guarantee may earn close to OTE while attaining very little, then meet a full quota in month seven with nothing underneath it. Year one can therefore look nothing like the steady state the OTE describes, in either direction, and a candidate who plans around their first-year total is planning around a number that will not repeat.

For the employer, OTE is a budgeting instrument. Total planned variable spend across the team, divided by expected attainment, is what finance actually commits to. Where the two drift apart, usually because quotas were set optimistically, the gap arrives as a compensation cost overrun nobody forecast. Which is why the question worth asking about any OTE, from either side of the table, is what share of the team reached it last year.