What is on-target earnings (OTE)?
On-target earnings (OTE) is base salary plus the variable pay a seller earns at 100% of quota. It is the number in the job posting and the offer letter. Actual pay lands above or below it depending on results. The split between base and variable is called the pay mix, written as a ratio such as 60/40.
Why it matters to a revenue leader
OTE sets how competitive a sales role looks to candidates and what each seller costs at plan. If OTE is high but few sellers hit quota, real pay falls short of the offer and good sellers leave. If quotas are easy, the company pays full OTE for average work. WorldatWork describes putting more pay at risk, for example moving from a 70/30 mix to 60/40, as a pay-for-performance lever. Its design guidance adds that collaborative or service-oriented roles may suit a heavier base, which fits many account management roles in services companies.
How to calculate it
OTE = base salary + target variable pay at 100% of quota. Pay mix = base ÷ OTE and variable ÷ OTE.
Common mistake: advertising an OTE that few current sellers reach.
Example
Fictitious numbersA fire protection company offers a seller a $90,000 base and $60,000 in target commission, an OTE of $150,000 with a 60/40 mix. Last year only four of nine sellers reached quota, so most earned well below $150,000, and two of the five who missed have since left.
"What did our median seller earn last year compared with the OTE we advertise?"
Sources
- On-target earnings checked 9 Oct 2026
- The Power of Pay-for-Performance Sales Compensation Plans checked 9 Oct 2026
- Sales Compensation Design: What Are the Keys to an Effective Plan? checked 9 Oct 2026