What Is OTE in Sales? On-Target Earnings Explained for Reps and the Ops Teams Who Set Them

OTE stands for on-target earnings: the total a salesperson earns in a year if they hit exactly 100% of their target. It is the base salary plus the variable pay (commission or bonus) the plan pays out at target.

A rep with a base salary of $60,000 and $40,000 of variable pay at target has an OTE of $100,000. Those figures are an illustrative example, not a market benchmark. If the rep lands at 80% of target, they earn less than OTE; at 120%, more, depending on how the plan pays above target.

That definition is simple. What makes OTE useful or useless is everything around it: how the target is set, what share of the role’s work the rep controls, and how the plan pays above and below 100%. This guide covers both sides, the rep reading an offer and the sales ops or RevOps person building the plan.

The parts of an OTE

Term	What it means	Example (illustrative)
Base salary	Fixed pay, paid regardless of performance	$60,000
Variable at target	Commission or bonus paid when the rep hits 100% of quota	$40,000
OTE	Base + variable at target	$100,000
Pay mix	The split between base and variable, written base/variable	60/40
Quota	The target the variable pay is measured against: revenue, meetings, pipeline	$500,000 in new annual contract value
Commission rate	Variable at target divided by quota, when the plan pays a flat rate per dollar	$40,000 / $500,000 = 8%
Accelerator	A higher rate paid on results above quota	1.5x the base rate above 100%
Cap	A maximum on variable pay (many plans have none)	None, or variable capped at 2x target

Every row depends on the others. Change the quota without changing the variable amount and the effective commission rate changes with it. That’s why an OTE figure on its own says very little.

OTE vs base salary vs total compensation

• Base salary is guaranteed. It is what lands in the account if the rep sells nothing.
• OTE is a plan design number: what the company expects a rep who hits target to earn.
• Actual earnings (sometimes called realised or W-2 compensation in the US) are what the rep really took home. Across a team, the gap between OTE and actual earnings tells you whether quotas are realistic.

When a job post says “$120K OTE”, it is quoting the second number. It promises nothing about the third.

Worked examples

All three plans below are illustrative, written for this guide.

An SDR plan paid on meetings

An SDR’s variable pay is usually tied to activity further up the funnel than closed revenue, because the SDR doesn’t control whether a deal closes.

• Base: $55,000
• Variable at target: $20,000 per year, paid quarterly ($5,000 per quarter)
• Quota: 45 qualified meetings held per quarter
• Rate: $5,000 / 45 ≈ $111 per qualified meeting held

If the SDR books 36 qualified meetings in a quarter (80%), they earn about $4,000 of variable that quarter. If they book 54 (120%) and the plan pays the same rate above target, they earn about $6,000.

Two details decide whether this plan works in practice. First, “held” vs “booked”: paying on booked meetings rewards stuffing the calendar with no-shows. Second, “qualified” needs a written definition the AE can’t veto after the fact, or every disputed meeting becomes a payroll argument.

An AE plan with an accelerator

• Base: $90,000
• Variable at target: $90,000 (50/50 mix)
• Quota: $900,000 new annual contract value
• Base rate: 10% of ACV up to quota; 15% above quota

At 100% the AE earns $180,000. At 110% ($990,000 closed), they earn $90,000 + $90,000 + 15% × $90,000 = $193,500. The accelerator is what makes the last deal of the year worth chasing.

A plan where the OTE looks good but isn’t

• Base: $50,000
• Variable at target: $70,000, advertised as “$120K OTE”
• Quota: set from a top-down revenue plan, with no check on territory size or pipeline coverage

If most of the team ends the year well below target, the realistic earnings for a new hire are close to base. The OTE number is technically accurate and practically misleading.

Questions to ask about an OTE in a job offer

For reps evaluating an offer, these questions get past the headline number:

1. What share of the team hit quota last year? If the answer is vague, assume it’s low.
2. What did a median rep in this role actually earn? Ask for actual earnings, not OTE.
3. What is the quota, and what is it measured on? Bookings, ACV, first-year revenue, meetings held, or opportunities created all behave differently.
4. When is commission paid, and is any of it clawed back if a customer cancels?
5. Is there a ramp? A reduced or guaranteed quota during the first months matters a lot when a new rep has no pipeline.
6. Is the plan capped? And are accelerators paid above target?
7. Who owns your territory or lead flow, and can it change mid-year?

How sales ops should set OTE (and what usually goes wrong)

For sales ops, OTE is an output of three decisions: the market rate for the role, the pay mix, and the quota. Most problems come from setting them in the wrong order or in isolation.

Start from the role, not the revenue plan

Decide the pay mix from how much of the outcome the rep controls. A role where the rep runs the whole sales cycle can carry more variable pay. A role that depends on marketing lead flow, a partner, or an AE converting the meeting should carry more base. Pushing variable pay onto people who don’t control the result produces turnover, not performance.

Build quota bottom-up, then reconcile

A top-down number (company revenue target divided by headcount) is a starting point, not a quota. Check it against capacity: how many opportunities a rep can work in a period, the historical conversion rates in your own CRM, and the pipeline actually available in each territory. Our guide to the sales operations manager role covers how territory design and forecasting feed into this. See also our explanation of what a sales quota is and how to set one.

Define the credited event precisely

Write down exactly what counts: a meeting is “held” when the prospect attends and the AE accepts it as qualified within a fixed number of days; a deal is credited at signature, not at invoice. Ambiguity here becomes the most common source of commission disputes.

Make the data auditable

Every variable payment should be traceable to records in the CRM or booking system: which meeting, which deal, which date. If reps can’t see their own running total, they’ll keep their own spreadsheet, and the two will disagree at payout. For SDR teams, tracking meetings booked and held per rep in the same system as the comp calculation removes most of these disputes. That’s the problem the SDR operations features in GTMStack are built around: bookings, outcomes and per-rep results in one place, so the number a rep sees is the number payroll uses.

Check OTE against actual earnings every quarter

The test of an OTE is whether reps who do the job well earn it. If almost nobody reaches target, the quota or the territory is wrong. If almost everybody blows through it, the quota is too easy and the company is overpaying. Either way, compare planned OTE with actual earnings per rep each quarter, not just at the annual plan reset.

Related terms

• Quota attainment: actual results divided by quota, usually as a percentage.
• Ramp: the period when a new rep’s quota is reduced or their variable pay is partly guaranteed.
• Clawback: commission taken back when a deal is cancelled or a customer churns within an agreed window.
• Draw: an advance against future commission, either recoverable (paid back from later commissions) or non-recoverable.
• SDR: the sales development representative role, whose OTE is usually tied to meetings or pipeline rather than closed revenue.