On Target Earnings (OTE)

On-target earnings (OTE) refer to an employee’s pay structure that is made up of a basic salary and an additional variable component, such as additional compensation or commission. It doesn’t tell an employee exactly what they’ll be earning. Rather, it’s what they will earn if they hit their targets.

OTE and similar pay arrangements are common in the sales industry, and they involve an agreement between the employee and the company that offers additional remuneration which is contingent on specific conditions or goals being met.

Let’s say that a sales representative is paid a $40,000 base salary plus $15,000 OTE subject to meeting 100% of their sales quota. If the sales representative meets this quota, their salary will be $55,000 whereas if they don’t, it will be $40,000.

What is OTE?