Sales Ops Glossary · Team & Compensation
On-Target Earnings (OTE) is the total annual compensation a sales rep receives when they achieve exactly 100% of their quota. It combines base salary and target variable pay (commission), and serves as the benchmark figure used to set expectations with candidates, model sales compensation costs, and calibrate quota levels.
OTE is not a guaranteed number — it is the expected outcome when a rep performs at plan. A rep who hits 80% of quota earns less than OTE; a rep who hits 120% can earn more, especially if accelerators are in place. This distinction matters enormously in recruiting conversations, where candidates often treat OTE as a floor rather than a target. RevOps and sales leaders need to be explicit: OTE assumes 100% quota attainment, nothing more.
OTE also shapes how companies think about sales hiring costs. If you plan to hire 10 AEs at $200K OTE with a 50/50 split, you are committing to $1M in base salary plus up to $1M in variable — assuming full attainment across the board. That math drives headcount budgets, hiring timelines, and ultimately revenue capacity models. Getting OTE wrong in either direction — too high to attract talent, too low to motivate it — creates downstream problems that take quarters to correct.
Formula
OTE = Base Salary + Target Variable (Commission at 100% quota)
Target Variable is the commission a rep earns when they close exactly their quota number. It does not include accelerators, bonuses, or SPIFFs. Base salary is fixed regardless of performance; target variable scales with attainment up to and beyond 100%.
Variable definitions
Worked example
An enterprise AE has a $240,000 OTE with a 50/50 split. Base salary is $120,000 per year. Target variable is $120,000. If the rep's annual quota is $1.2M in new ARR, their commission rate is $120,000 ÷ $1,200,000 = 10% of closed revenue. At 80% attainment ($960K closed), they earn $96K variable — total cash of $216K, below OTE.
Teams that leave OTE undefined or inconsistent across roles struggle to recruit competitively and model compensation costs accurately. When a VP of Sales posts a role with 'OTE $180K' without specifying the split, quota, or attainment history, candidates make assumptions — and those assumptions almost always skew optimistic. The result is early attrition when reps discover the quota is rarely achievable, which costs $50K–$100K per failed hire when you factor in recruiting fees, ramp time, and lost pipeline.
OTE is also the anchor point for every other compensation design decision. Accelerators are set as multiples of OTE. Clawback policies reference OTE thresholds. Pay equity reviews compare OTE across roles and regions. If OTE is set incorrectly — too high relative to market, or with a split that doesn't match role risk — the entire comp plan is miscalibrated before a single deal is closed. Revisiting OTE at least annually, benchmarked against current market data, is a core RevOps responsibility.
Evaluating team & compensation tools?
Browse software →When posting a role, always state the OTE, the split, the quota, and the historical attainment percentage for the team. A posting that says '$200K OTE, 50/50 split, $1.2M quota, 58% of reps at or above plan last year' gives candidates the information they need to evaluate the opportunity honestly. This transparency reduces interview drop-off and filters out candidates who need a higher floor.
During comp plan design, set OTE before setting quota. Determine what you need to pay to attract the talent profile you want, then back-calculate the quota required to deliver the target variable at an acceptable commission rate. Starting with quota and working backward to OTE often results in a mismatch where either quota is too high or OTE is too low for the market.
Build an OTE corridor, not a single number. High-cost markets (San Francisco, New York) may require 15–25% premiums over national benchmarks. Remote roles introduce complexity — some companies pay location-adjusted OTE, others pay a single national rate. Document the policy clearly in the comp plan and apply it consistently to avoid pay equity issues that surface during HR audits or employee conversations.
Posting an OTE that requires top-decile attainment to achieve creates early attrition. Reps who join expecting $220K and earn $160K in year one leave by month 10, costing the company their ramp investment and forcing another hire cycle.
Giving an SDR a 70/30 split treats a role with limited deal control like a full-cycle AE position. SDRs typically see 80/20 or 75/25; pushing too much at-risk pay into early-stage roles increases turnover and reduces pipeline volume.
Using 2021 OTE benchmarks in 2025 recruiting leaves companies 20–30% below market in competitive segments. Top candidates with competing offers take the higher number, and existing reps begin passive job searches when they discover the discrepancy through peer networks.
Candidates often ask 'what can I make?' If reps have no accelerators, OTE is also their ceiling — a major disincentive for high performers who expect upside. Failing to design and communicate uncapped upside (or realistic caps) drives top reps to competitors with better comp architecture.
OTE modeling starts in spreadsheets but quickly requires dedicated sales compensation software to manage plan documents, quota assignments, attainment tracking, and payout calculations at scale. CRM data feeds attainment; compensation platforms automate payout and provide rep-facing dashboards so reps can see projected earnings in real time.
For mid-market AEs at a SaaS company, $120K–$180K OTE is common in 2024–2025. Enterprise AEs at companies selling deals above $100K ACV typically range from $180K–$280K. These numbers shift significantly by geography — San Francisco and New York roles run 20–30% above national medians. Always cross-reference against RepVue, Levels.fyi, and Betts Recruiting data for your specific segment and deal size.
OTE and quota are directly linked through the commission rate. If you set OTE at $200K with a 50/50 split ($100K variable) and a $1M quota, the implied commission rate is 10%. If you later raise OTE to $240K without raising the quota, the commission rate jumps to 12%, increasing your CAC. Sales planning should model OTE-to-quota ratios before finalizing either number, not in isolation.
No. OTE typically refers to total cash compensation — base plus target variable — at 100% quota attainment. It usually excludes equity (RSUs, options), benefits, 401K match, and any one-time signing bonuses. When evaluating a total compensation offer, candidates should add equity value and benefits separately. RevOps teams modeling comp costs should similarly distinguish between OTE (cash) and total comp (cash + equity + benefits).
Role risk and deal influence should drive the split. SDRs, who have no direct deal control, typically see 75/25 or 80/20 (base/variable). Full-cycle AEs with quota ownership typically see 50/50 to 60/40. Sales engineers and customer success managers who influence expansion but don't own a quota often see 70/30 to 80/20. Channel or partner managers, who depend on external partners closing, are often closer to 70/30. The more direct control a role has over revenue, the higher the variable proportion can reasonably be.
At minimum, annually during comp plan season — typically Q4 for plans effective January 1. However, if hiring is stalling because candidates are declining offers citing comp, or if you lose multiple reps in a quarter to competitors with higher OTE, those are signals to do an off-cycle review. Market benchmarks from Radford, OpenComp, and Betts update quarterly, so the data is available to justify mid-year adjustments when needed.