Key points:
- OTE (on-target earnings) is your employee’s base salary plus variable pay – but only the base is guaranteed.
- The pay mix matters more than the headline – an £80k OTE at 50/50 is very different from 70/30.
- A high OTE built on a low base can signal churn or unrealistic quotas, not a better deal.
- Most reps hit only 60–70% of OTE in a year, so treat the figure as a projection.
- For employers, a credible OTE starts with fair, transparent salary bands – exactly where Figures helps you set them.
For certain industries and job roles, you might see salaries advertised as “£50k basic OTE £70k.”
Knowing how OTE works matters for HR and People teams setting pay, and for anyone weighing up an offer. Done well, it attracts strong people and rewards performance – but only if the numbers behind it are realistic.
Let’s break down what OTE means, how it’s calculated, and how to tell a fair OTE from a misleading one.
What is OTE?
OTE stands for on-target earnings – the total annual pay an employee earns if they hit 100% of their performance or sales targets. It’s made up of two parts: a guaranteed base salary, plus variable pay (commission and/or a bonus) that’s only paid in full when targets are met. .
OTE isn’t a maximum or a ceiling. If commission is uncapped, strong performers can earn beyond it. You’ll also see it called on-track earnings, total potential compensation, or total expected income – all the same thing.
OTE is most common for commission-based roles, including:
- Sales director
- Sales manager
- Field sales representative
- Financial advisor
- Real estate agent
- Account executive
- Marketing manager
This type of salary structure incentivises employees to perform their best – because they earn more money when they do. For companies, it also makes sense from a budget point of view, because they can pay a lower base salary but still attract top talent who are confident in their abilities to meet their sales targets.
Components of OTE
Every OTE figure breaks down into two parts:
- Base salary – a fixed amount, paid regardless of performance.
- Variable pay – commission and/or bonus, paid as targets are met. Commission is usually a percentage of the revenue an employee generates, while a bonus is paid when specific goals are met in a set period. For example, selling £20,000 of products or services on a 10% commission rate earns an extra £2,000.
Here’s an example:
- Base salary: £40,000
- Sales commission: £10,000
- Bonus: £1,000
- Total OTE: £51,000
What OTE doesn’t include:
- Benefits
- One-time bonuses
- Overtime
Quick clarification on two terms OTE gets confused with:
- Base salary is just the fixed part – no commission or bonus.
- Total compensation is broader – base plus benefits like healthcare, pension, and paid time off.
OTE sits between the two: more than base alone, but focused on cash earnings rather than the full benefits package.
Pay mix: How OTE is split
Pay mix is the ratio between the base salary and variable pay. Two roles can advertise the same OTE but feel completely different depending on the split.
Common pay mixes:
- 50/50 – half base, half variable. Higher risk, higher reward.
- 60/40 – the most common split for many sales roles.
- 70/30 – weighted more toward a stable base.
For example, an £80,000 OTE on a 60/40 mix is £48,000 base plus £32,000 variable.
So what does a ‘£50k OTE’ or ‘£80k OTE’ actually mean? It’s the total an employee would earn at 100% of the target – but always check the split. A £50,000 OTE at 70/30 (£35,000 base) is very different from £50,000 at 50/50 (£25,000 base).
How do you calculate OTE?
Here are the steps you need:
- Set a base salary. Using salary benchmarking helps you set a realistic base salary using real-time market data. When you set that base, ground it in real market data so it’s fair and defensible – tools like Figures help you build fair, transparent salary bands so base pay sits at the right level before you add commission on top.
- Set a sales quota (for example, £200,000 per year).
- Set a commission rate (for example, 10% of every sale).
Now you have all those details, you’re ready for the formula: Base salary + on-target variable pay = OTE.
Let’s take a closer look at this process in action:
- For a base salary of £60,000, an on-target commission of £20,000, and a bonus of £5,000 the advertised OTE salary would be £85,000.
- If the employee reaches 100% of their quota, their gross salary will be £85,000.
- If they reach 75% of their quota, (equalling £15,000 in sales commission), their gross salary will be £80,000 (assuming their bonus remains the same).
- If they reach 150% of their quota, (equalling £30,000 in sales commission), their gross salary will be £95,000.
What's a good OTE? Typical ranges by role
There's no single ‘good’ OTE – it depends on the role, deal size, industry, and location (London sits at the top of each range). As a rule of thumb, OTE for a fully commission-driven role often lands around 50% or more above base.
Typical UK OTE ranges (individual contributors, base → on-target earnings):
Two things matter more than the headline number. First, the split: a £100,000 OTE on 50/50 (£50,000 guaranteed) is far safer than the same OTE on a variable-heavy 70/30. Second, whether commission is capped – uncapped commission with accelerators means strong performers can earn well beyond their stated OTE.
Why OTE matters
Here’s more about why OTE matters, for job seekers, employees, and employers.
Job seekers
For someone who is applying for jobs with an OTE salary, it’s important for them to understand how the salary is structured, and the breakdown between the three different components.
It’s also crucial to remember that the advertised OTE salary isn’t guaranteed. Before applying for an OTE role, a job seeker should weigh up whether the base salary alone is enough to cover their expected living costs, and whether they have the skills and motivation to meet the level of sales required.
One way to achieve this is to ask to see the anonymised OTE performance analysis for current employees. If this data is available, it can give a good indication of whether most employees are meeting their targets and earning the advertised OTE salary, or not.
Employees
Employees earning an OTE salary need to know the difference between their guaranteed base salary, and any additional sales commissions and bonuses. While their base salary is guaranteed, it might not be enough to cover their living costs.
Understanding how OTE salaries work can help employees set realistic goals for their earning potential, and plan their finances because they have a clear target to work towards.
OTE salaries can also help employees connect the dots between their performance and their earnings – because the harder they work and the more sales they close, the more they earn. This can sometimes be very motivating, but OTE salaries can have their downsides for employees too.
Some people may find it stressful knowing they have to consistently perform and meet their targets. Others may become frustrated with a capped OTE because they feel this limits their earning potential.
Employers
Employers need to carefully consider if the targets they’re setting are realistic enough for employees to attain, but challenging enough to maintain performance and motivation.
OTE salaries are a way to attract top talent without offering above-average market rates because these employees are generally confident in their ability to meet their targets.
During the salary benchmarking process, it’s a good idea to look at the breakdown of employees on OTE salaries and analyse how many are above, on, and below the median. This can help when adjusting the breakdown between the different components of an OTE salary in the future.
OTE salaries are a good way for companies to plan their budget because it’s easier to account for the fixed base salary of each employee while accounting for any additional expenses and revenue generated through sales and their associated commissions.
The harder part is setting the base and the bands fairly and consistently – and being open about them. Transparency around OTE tends to build trust with the team, not undermine it. This is where a compensation management platform helps you make fair, data-informed pay decisions rather than guessing. Swan, for example, ended up with 100% of employees positioned within their internal salary bands.
How to handle OTE negotiations
Like any salary, OTE isn’t set in stone. Candidates will often negotiate it at offer stage, and employees may revisit it during performance reviews. It can be a tricky conversation to manage, especially when you want to land the hire without unpicking the pay structure you’ve worked hard to build. Four things help you get it right.
1. Know your numbers before the conversation
Strong candidates will have done their research on market rates, so you should too. Go in knowing the role’s salary band, what your current team earns for the same job, and – just as importantly – what they actually take home. If the advertised OTE is £80,000 but most of the team reach 60% of quota, candidates will question things, so have an honest answer ready.
2. Know where the band ends
Decide the top of the range before you sit down, not in the moment. Knowing the most you can offer (and why), keeps the conversation calm and stops a competitive hire from pulling pay out of line with the rest of the team. A one-off deal to win a single candidate can open a pay gap you’ll have to explain later.
3. Expect pushback, and prepare your position
Candidates tend to negotiate hardest on base salary, because that’s the part that’s guaranteed. Work out in advance which levers you’re willing to pull, so you’re not improvising under pressure. A clear, consistent position reads as fair, and it’s far easier to defend if a candidate or employee asks how the number was reached.
4. Flex the structure, not just the figure
A negotiation doesn’t have to mean a bigger headline OTE. Often the better move is to change the shape of the deal. For example, a higher base with lower variable for someone who needs security, a signing bonus, a guaranteed commission draw during ramp, or accelerators for over-performance. Whatever you agree, write down the reasoning and check it against your salary bands.
OTE salary FAQs
What are the advantages and disadvantages of OTE?
Advantages include:
- Motivating employees to perform their best.
- Offers high earning potential.
- Attract top talent.
- Allow for budget planning when setting base salaries.
Disadvantages include:
- They’re not suitable for all industries and job roles.
- Setting sales commission too high may demotivate some employees.
- Capped OTE may frustrate other employees who prefer unlimited potential.
What’s a good OTE percentage?
Many factors influence this percentage, from the specific industry to a company’s size, budget, and market positioning. It can also be influenced by an employee’s job title, sales quota, and experience. Generally, the OTE should be 50% higher than the base salary.
What is a 50-50 OTE?
This is an OTE with equal percentages of base salary and commission.
How realistic are OTE earnings?
Most OTE earnings are carefully calculated to be a realistic target for sales professionals. OTEs are designed to help motivate employees to achieve their targets – so if they’re set too high they can end up being counter-productive. But, OTE salaries aren’t guaranteed earnings, and reaching them depends on hard work and dedication.
Is OTE only for sales roles?
No. It’s most common in sales, but also used for other variable-pay roles – some executive, account management, and customer success positions where pay is tied to performance.
What does OTE mean in trading?
In trading, OTE refers to open trade equity – a different concept entirely, unrelated to salary.
Exceptions piling up? We help you build salary bands solid enough to absorb them, and document the ones that remain.
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