{"id":12789,"date":"2023-01-11T09:53:42","date_gmt":"2023-01-11T17:53:42","guid":{"rendered":"https:\/\/www.zippia.com\/employer\/?p=12789"},"modified":"2023-05-11T15:01:54","modified_gmt":"2023-05-11T22:01:54","slug":"ote-on-target-earnings","status":"publish","type":"post","link":"https:\/\/www.zippia.com\/employer\/ote-on-target-earnings\/","title":{"rendered":"OTE: On-Target Earnings Defined (With Examples)"},"content":{"rendered":"<p><!--Skip-->\n<link href=\"https:\/\/static.zippia.com\/galleries\/css\/htgaj.css\" rel=\"stylesheet\"\/>\n<div class=\"example-answer\">\n<blockquote><p>\n<b>Summary.<\/b> On-target earnings (OTE) is a metric that predicts how much an employee will earn in a year if they meet all of their performance targets. OTE typically includes things like salary, commissions, and bonuses. This term is most common in sales-based professions where an employee&#8217;s pay comes from commission.\n<\/p><\/blockquote>\n<\/div>\n<p>Setting salaries can be difficult enough normally, but when performance-based commissions and bonuses get involved, it gets that much more complicated.<\/p>\n<p>To help with this, companies that offer performance-based pay usually calculate OTE, or on-target earnings, to let their salespeople and managers know how much they\u2019ll earn if they accomplish their sales goals.<\/p>\n<p>In this article, you\u2019ll learn more about OTE and how to calculate it for your employees.<\/p>\n<p><b>Key Takeaways:<\/b><\/p>\n<ul class=\"large-bullets\">\n<li>\n<p>OTE includes employees\u2019 base salaries as well as the commissions and bonuses they\u2019ll earn if they hit their performance goals.<\/p>\n<\/li>\n<li>\n<p>OTE is commonly used in sales and management positions.<\/p>\n<\/li>\n<li>\n<p>Companies have different philosophies and rules surrounding what OTE represents as far as a guarantee of how much employees will make.<\/p>\n<\/li>\n<\/ul>\n<p><img alt=\"ONE: On-Target Earnings Defined (With Examples)\" src=\"https:\/\/www.zippia.com\/employer\/wp-content\/uploads\/2022\/08\/OTE-On-Targer-Earnings-Defined-With-Examples.png\" style=\"width:100%;\"\/><\/p>\n<h2 class=\"fancy\" class=\"fancy\" id=\"what-is-ote\">What Is OTE?<\/h2>\n<p>OTE is a metric that predicts how much an employee will earn in a year if they meet all of their performance targets.<\/p>\n<p>OTE stands for on-target or on-track earnings, and it usually includes:<\/p>\n<ul class=\"large-bullets\">\n<li>\n<p>Salary<\/p>\n<\/li>\n<li>\n<p>Commissions<\/p>\n<\/li>\n<li>\n<p>Bonuses<\/p>\n<\/li>\n<\/ul>\n<p>This term is most common in sales-based professions where much of employees\u2019 pay comes from commission, but it\u2019s also commonly used for <a href=\"https:\/\/www.zippia.com\/advice\/four-functions-of-management\/\">management<\/a> roles that offer significant pay fluctuations or bonuses based on the manager\u2019s performance.<\/p>\n<p>Employees in these roles rely on their OTE to know approximately how much they\u2019re going to make, so if your company is hiring in any of these areas, you\u2019ll need to calculate the positions\u2019 OTE.<\/p>\n<div ckmz=\"zippia\">\n<div class=\"row\" onclick=\"location.href='\/employer\/?src=inlinePostAJob-12789';\" style=\"font-size: 14px;color: #333; background: #fff; width: 100%; border: 1px solid #d8dee2; border-radius: 0 0 5px 5px; padding: 20px; justify-content: space-between;box-shadow: 0 18px 20px -20px rgb(0 0 0 \/ 15%); margin:0px; cursor:pointer;\">\n<div class=\"col-sm-8 col-xs-12\" style=\"-webkit-text-size-adjust: 100%; -webkit-tap-highlight-color: rgba(0,0,0,0); --vh: 12.87px;font-size: 14px;line-height: 1.42857143; color: #333; font-family: Open Sans,serif;font-style: normal; box-sizing: border-box;\">\n<div style=\"display: inline-block;margin-top: 10px;font-weight: 600;font-size: 20px;\">Get Started Hiring Now<\/div>\n<\/div>\n<div class=\"col-sm-4 col-xs-12\" style=\"font-weight: 600;font-size: 16px;line-height: 24px; text-align: center; text-transform: capitalize; color: #fff; background: #ff6000; border-radius: 4px; height: 48px; border: none; font-family: Open Sans,serif; display: -webkit-flex; display: flex; -webkit-justify-content: center; justify-content: center; -webkit-align-items: center; align-items: center;\">\n<a href=\"\/employer\/?src=inlinePostAJob-12789\" style=\"color: white!important;\">Post A Job<\/a>\n<\/div>\n<\/div>\n<\/div>\n<h2 class=\"fancy\" class=\"fancy\" id=\"how-to-calculate-ote\">How to Calculate OTE<\/h2>\n<p>When you\u2019re calculating OTE for a current employee or a job description, here are the steps you need to follow:<\/p>\n<ol class=\"ordered-list-large\">\n<li class=\"ordered-list-large-item\">\n<p><b>Determine the base salary.<\/b> You need to know the <a href=\"https:\/\/www.zippia.com\/advice\/base-salary\/\">base pay<\/a> that the employee will be guaranteed no matter how they perform. If your organization doesn\u2019t already have a set rate for this, talk with your financial and HR team to determine fair compensation for the employee\u2019s presence and work that doesn\u2019t necessarily involve making sales.<\/p>\n<\/li>\n<li class=\"ordered-list-large-item\">\n<p><b>Decide on performance targets.<\/b> These are usually sales quotas, whether for individual salespeople or a manager\u2019s branch or team.<\/p>\n<p>Unless you\u2019re using OTE as a stretch goal, make sure these targets are reasonable and seem attainable to employees and job candidates: Otherwise, they won\u2019t be motivated to even try to win what they see as a losing game.<\/p>\n<\/li>\n<li class=\"ordered-list-large-item\">\n<p><b>Attach a monetary value to those performance targets.<\/b> In other words, how much commission or <a href=\"https:\/\/www.zippia.com\/advice\/how-bonuses-work\/\">bonus<\/a> pay can an employee earn for each performance goal they meet?<\/p>\n<p>This will likely vary based on the role and how difficult the targets are to achieve based on the complexity of the sales process, how established your company is, and how competitive the industry is. It can also be a percentage \u2013 as it often is for a sales commission \u2013 or a fixed number \u2013 as it often is for a bonus.<\/p>\n<\/li>\n<li class=\"ordered-list-large-item\">\n<p><b>Add the base salary and the performance target compensation together.<\/b> This is your final step in calculating OTE, and it is the number that you can list on the job description or in the <a href=\"https:\/\/www.zippia.com\/advice\/job-offer\/\">job offer<\/a>.<\/p>\n<\/li>\n<li class=\"ordered-list-large-item\">\n<p><b>Make sure it makes sense.<\/b> As with any math problem, stop and make sure your OTE makes sense. Is it comparable to your current employees? Does it make sense with the market\u2019s average salary?<\/p>\n<p>Always have someone else trustworthy check it before you finalize the OTE. You don\u2019t want to make it too low and not attract any candidates or too high and not be able to fulfill it once you hire someone.<\/p>\n<\/li>\n<\/ol>\n<h2 class=\"fancy\" class=\"fancy\" id=\"additional-tips-for-calculating-ote\">Additional Tips for Calculating OTE<\/h2>\n<ul class=\"large-bullets\">\n<li>\n<p><b>Determine your company\u2019s OTE philosophy.<\/b> Different companies have different views on what OTE means, so your organization needs to decide what it means for your employees. Here are a few of the common schools of thought around OTE:<\/p>\n<ul class=\"large-bullets\">\n<li>\n<p>OTE is the minimum requirement for your employee, and if they don\u2019t hit the performance targets that correspond to the OTE, they\u2019ll be fired.<\/p>\n<\/li>\n<li>\n<p>OTE is the typical take-home pay that the average salesperson at your company earns and is based on the market, <a href=\"https:\/\/www.zippia.com\/advice\/cost-living-adjustment\/\">cost of living<\/a>, and reasonable sales goals. It also may be higher or lower than a particular employee actually earns, depending on how they perform.<\/p>\n<\/li>\n<li>\n<p>OTE represents the maximum amount of money that employees could earn if they sell especially well, but the majority won\u2019t because those performance targets are stretch goals.<\/p>\n<\/li>\n<\/ul>\n<\/li>\n<li>\n<p><b>Establish an OTE cap if you choose to set one.<\/b> One of the most common questions you\u2019re going to get from a job candidate is if they can exceed their OTE and by how much. However you decide to answer this, you just need to make sure it\u2019s consistent with the rest of your current and future employees.<\/p>\n<\/li>\n<li>\n<p><b>Balance realism with enticement.<\/b> Some companies may base the OTE they put in a job offer on the candidate\u2019s past earnings. While this is a good way to make sure you aren\u2019t paying them more than you have to, it doesn\u2019t necessarily do much to convince them to come work for you.<\/p>\n<p>Add a little extra to sweeten the pot and motivate them, but not so much that you have to lower it once they start working. This would be unethical, and your employees aren\u2019t likely to stay long if you do this.<\/p>\n<\/li>\n<li>\n<p><b>Remember that your salespeople have other work responsibilities.<\/b> Your sales representatives are going to have non-sales work that they need to do, and you need to pay them for, so include that in the <a href=\"https:\/\/www.zippia.com\/advice\/salary-range\/\">salary<\/a> part of your OTE calculations as well.<\/p>\n<\/li>\n<\/ul>\n<div ckmz=\"zippia\">\n<div class=\"row\" onclick=\"location.href='\/employer\/?src=inlinePostAJob-12789';\" style=\"font-size: 14px;color: #333; background: #fff; width: 100%; border: 1px solid #d8dee2; border-radius: 0 0 5px 5px; padding: 20px; justify-content: space-between;box-shadow: 0 18px 20px -20px rgb(0 0 0 \/ 15%); margin:0px; cursor:pointer;\">\n<div class=\"col-sm-8 col-xs-12\" style=\"-webkit-text-size-adjust: 100%; -webkit-tap-highlight-color: rgba(0,0,0,0); --vh: 12.87px;font-size: 14px;line-height: 1.42857143; color: #333; font-family: Open Sans,serif;font-style: normal; box-sizing: border-box;\">\n<div style=\"display: inline-block;margin-top: 10px;font-weight: 600;font-size: 20px;\">Get Started Hiring Now<\/div>\n<\/div>\n<div class=\"col-sm-4 col-xs-12\" style=\"font-weight: 600;font-size: 16px;line-height: 24px; text-align: center; text-transform: capitalize; color: #fff; background: #ff6000; border-radius: 4px; height: 48px; border: none; font-family: Open Sans,serif; display: -webkit-flex; display: flex; -webkit-justify-content: center; justify-content: center; -webkit-align-items: center; align-items: center;\">\n<a href=\"\/employer\/?src=inlinePostAJob-12789\" style=\"color: white!important;\">Post A Job<\/a>\n<\/div>\n<\/div>\n<\/div>\n<h2 class=\"fancy\" class=\"fancy\" id=\"ote-faq\">OTE FAQ<\/h2>\n<ol class=\"ordered-list-large\">\n<li class=\"ordered-list-large-item\">\n<p><b>What does OTE mean?<\/b><\/p>\n<p><b>OTE means on-track or on-target earnings.<\/b> It\u2019s a metric used to determine how much a salesperson can earn in a year if they hit their sales goals.<\/p>\n<p>OTE includes the salesperson\u2019s base salary and any commissions or bonuses that they can earn if they meet set performance targets. Companies put this number on job descriptions or job offers to let candidates know how much they\u2019ll likely earn in a particular position.<\/p>\n<p>OTE is most often used in sales-based positions, but managers can have OTEs that include <a href=\"https:\/\/www.zippia.com\/advice\/average-bonus-statistics\/\">bonuses<\/a> they can earn based on how well their team or branch location performs.<\/p>\n<p>Depending on the company, an OTE may be a guaranteed amount the employee will earn if they\u2019re doing their job at all, an estimate of the average pay they\u2019ll earn if they work hard, or a maximum amount they can earn based on performance targets that few actually reach.<\/p>\n<\/li>\n<li class=\"ordered-list-large-item\">\n<p><b>Is OTE on top of salary?<\/b><\/p>\n<p><b>No, OTE isn\u2019t on top of salary.<\/b> OTE includes the base salary, commissions, and bonuses that an employee can earn. Many sales positions will list the OTE on the job description or job offer to give candidates an idea of how much they\u2019ll be making, as it\u2019s an estimate of the total amount of money they can earn for the year.<\/p>\n<p>While OTE does usually include any salary adjustments that come from working second or third shifts, it generally doesn\u2019t include any overtime pay that employees may be able to earn.<\/p>\n<p>To attract, keep, and motivate employees, companies need to set an OTE that creates a <a href=\"https:\/\/www.zippia.com\/advice\/competitive-pay\/\">competitive overall take-home pay<\/a> and feels doable to workers.<\/p>\n<\/li>\n<li class=\"ordered-list-large-item\">\n<p><b>What does 75k OTE mean?<\/b><\/p>\n<p><b>75k OTE means employees will make about $75,000 total if they hit all of their performance targets that year.<\/b> OTE stands for on-track or on-target earnings, and it includes employees\u2019 salaries and any commissions or bonuses they will likely earn during the year by reaching performance goals.<\/p>\n<p>While this is the way OTEs work for most companies, some see this number as the minimum amount employees will earn, as they\u2019ll be fired if they don\u2019t reach the sales targets that will earn them that amount of money in commissions.<\/p>\n<p>Others see it as the maximum amount that you could earn if you do an amazing job, although few employees will actually earn that much.<\/p>\n<p>Because there are so many different philosophies, companies need to establish what OTE is to them so they can be consistent for all of their current and new hires.<\/p>\n<\/li>\n<\/ol>\n<h2 class=\"fancy\" class=\"fancy\" id=\"references\">References<\/h2>\n<ol class=\"ordered-list-large\">\n<li class=\"ordered-list-large-item\">\n<p><a href=\"https:\/\/corecommissions.com\/ote-and-commissions\/\">Core Commissions &#8211; What is On-Target Earnings (OTE), and How Does it Apply to Commissions<\/a><\/p>\n<\/li>\n<li class=\"ordered-list-large-item\">\n<p><a href=\"https:\/\/www.performio.co\/insight\/ote-model\">Performio &#8211; On Target Earnings (OTE) Model<\/a><\/p>\n<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>On-target earnings (OTE) is a metric that predicts how much an employee will earn in a year if they meet all of their performance targets.<\/p>\n","protected":false},"author":282,"featured_media":12791,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[98,134],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.9 - 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