On-Target Earnings (OTE)

What are On-Target Earnings?

On-target earnings refer to a particular type of salary. Instead of a fixed annual salary, it includes a base salary as well as commission. An employee can only earn a commission if they reach their targets.For example, if a job description says the on-target earnings are $100K per year, that could mean a $70K base salary and $30K in commission. As long as the employee reaches their quota every month, they will earn the full on-target salary.

This type of salary is not for every kind of role. It wouldn’t work for an admin role as there are no clear targets with jobs like that. However, it’s common for sales roles. Sale roles have fixed targets each month. The more sales the salesperson makes, the more money is made, so it makes sense that the employee then gets paid more.

As well as roles with definite goals, it’s also suitable for money-motivated employees, who have high amounts of energy, and enjoy a little competition.

There are benefits to on-target earnings instead of a fixed salary for the year. Firstly, it boosts motivation in the workplace. If an employee can earn more by working hard and reaching goals, they are more likely to do so.

On top of that, it ensures organizations don’t pay a too-high salary to people who underperform. In essence, the company pays for what it receives from its employees.