OTE
On-Target Earnings (OTE) is the total annual compensation a sales representative is expected to earn if they achieve 100% of their assigned quota, calculated as base salary plus variable commission at full quota attainment.
A sales rep with an $80,000 base salary and $80,000 variable at quota has an OTE of $160,000. OTE is a projection, not a guarantee — actual earnings vary with sales performance.
Why OTE matters to RevOps and Finance leaders
OTE is more than a recruiting number — it's the input that drives sales hiring budgets, cost-of-sales modeling, quota capacity planning, and commission expense forecasting under ASC 606. When RevOps benchmarks OTE against quota (the "OTE-to-quota ratio," typically 4× to 6× for SaaS AEs), Finance can predict commission expense as a percentage of bookings and surface plans that are economically unsustainable before they get approved.
OTE also anchors how reps interpret their offer letter. A poorly-explained OTE figure — especially one quoted without an associated pay mix or quota — is the single most common source of compensation disputes in the first 90 days of employment. Defining OTE precisely (and showing reps the math) is one of the highest-leverage transparency wins available to a comp team.
How OTE is calculated: worked example
Consider a B2B SaaS Account Executive with the following plan parameters:
OTE vs base salary vs total compensation
These three figures are routinely confused in offer letters and Glassdoor postings. The distinctions matter:
OTE benchmarks by sales role (US, B2B SaaS, 2026)
The following ranges reflect 2025–2026 RepVue and Pavilion benchmarks for US-based B2B SaaS roles. Ranges vary by company stage, region, and product complexity:
Common OTE confusions, answered
"Is my OTE my salary?"
No. OTE is the total you'll earn if you hit 100% quota — and only the base salary portion is guaranteed. If your offer letter shows a $160,000 OTE with a 50/50 pay mix, your guaranteed pay is $80,000. The rest depends on closing deals.
"Is OTE prorated during my ramp?"
OTE itself is annualized, but variable pay during ramp is usually based on a reduced quota or a draw. Most B2B SaaS companies offer a ramped quota (e.g., 25% / 50% / 75% / 100% across the first four quarters) and may also pay a non-recoverable draw to bridge variable pay during early months. Read more about ramp periods.
"My OTE includes benefits, right?"
No. OTE is base salary plus variable cash commission only. It does not include health insurance, retirement contributions, equity, signing bonuses, or one-time incentives like SPIFFs. Total compensation is the broader figure that includes these.
"How is OTE different from a salary cap?"
OTE is the expected earnings at 100% quota, not a maximum. Most strong sales plans are uncapped, meaning reps can earn well above OTE by exceeding quota — often with accelerators that increase the commission rate beyond 100% attainment.
Calculate your OTE in 30 seconds
Frequently asked questions about OTE
What does OTE mean in sales?
OTE stands for On-Target Earnings. It is the total annual compensation a sales rep will earn if they achieve 100% of their quota, including base salary and variable commission. OTE is a projection, not a guaranteed payout.
How is OTE calculated?
OTE is calculated by adding base salary to the variable commission a rep would earn at 100% quota attainment. For example, a rep with $80,000 base salary and $80,000 variable at quota has an OTE of $160,000. The ratio of base to variable is called the pay mix.
Is OTE guaranteed?
No. OTE is not guaranteed. It represents expected earnings at 100% quota attainment. Only the base salary portion of OTE is guaranteed. The variable portion depends on actual sales performance, and reps who miss quota will earn less than their OTE.
What is the difference between OTE and base salary?
Base salary is the fixed annual pay a rep receives regardless of performance. OTE is base salary plus variable commission earned at 100% quota. A $160,000 OTE with a 50/50 pay mix consists of $80,000 guaranteed base salary and $80,000 variable commission that depends on hitting quota.
Is OTE prorated during a ramp period?
OTE itself is typically expressed as an annualized figure, but the variable portion is usually prorated during the ramp period. During ramp, reps often receive reduced quotas and a draw or guarantee to bridge the gap until they can reach full attainment, which means actual earnings during ramp are lower than full OTE.
Does OTE include benefits or equity?
OTE includes base salary plus variable commission. It does not include benefits, equity, signing bonuses, SPIFFs, or other one-time incentives. Total compensation, which is a broader figure, includes these additional components.