what is OTE?

The other day I was having a conversation with a client in which I said the following:

That sales rep will be looking for an OTE of at least 190K …

at which point the person asked me:

What is OTE?

Good question!  OTE stands for On Target Earnings.  Generally OTE covers employees that have a fixed and a variable component to their pay.  Essentially it implies that if the individual hits all their targets, set for them by the company, they have a potential to earn a certain amount, which includes their base pay, commissions, bonuses, or other variable components to their total cash income.

Let’s use the example above.  Sales people know they have two major components to their pay:  a base amount that they receive as a regular scheduled payroll payment and a commission amount that is based on the amount of business that they close.  Sales people know they will be given a sales quota to achieve each quarter/year but they also know there is a certain annual salary, including commissions, that they expect to make to close those sales.  This particular sales person wanted to make at least $190,000 annual income.  We were offering a regular base payment of $110,000 per year and the variable component, or commission, was $80,000.  The sales person would be looking to make sure that the quota and commission structure allowed them to make the $80,000 if they ‘made their targets.’ Thus my statement of ‘that sales rep would be looking for an OTE of at least 190K’.

As mentioned above, OTE is used to describe any employee with a variable component to their salary based on achieving a target (e.g. executives with a management bonus, employees with profit sharing, etc.) but it is most commonly heard in association with sales people.

Hope that helps!