One of the things you should know when applying for sales positions is what OTE means. This term states how much money you will earn at a particular sales job. Companies often put the OTE salary in their job advertisements to attract potential employees.
The sum of money is not fixed, and your salary on this job may be higher or lower than the written OTE sum. Let’s not confuse calculations. Let’s see what OTE salary means in sales and how to negotiate better pay. After all, you deserve to know what you are signing for to avoid any unpleasant surprises on the payment day.
Summary
OTE in sales most commonly, means the intended salary in sales if you hit the specified quota. Being cooperative but knowing what you want is the best way to negotiate better pay in sales.
Here are the topics we’ll cover in this article:
What does OTE salary mean in sales?
OTE stands for on-target earnings, which are the potential salary you will get annually. It includes an expected wage and some extra commissions. However, it does not cover the money you will get for working overtime or any additional bonus. OTE does not point out precisely the amount of money you will get for the job. It only gives you an overview of what you can expect from working in that sales position.
On-target earnings are often used in sales because they increase the performance of employees. The sum you see in the job ad states the potential earnings for hitting expected targets. If you work harder and achieve great success in sales, you will be paid more for any positive results of your work.
This payment system is equally advantageous for businesses and their employers. It’s because employers do not waste money on unproductive workers and often get positive results by meeting estimated targets. At the same time, workers are motivated to do more to get a better salary.
Here’s a quick recap:
- OTE is the projected salary with the compensation structure at a company.
- It can either be capped or uncapped.
- The commission is added to the base to figure out overall compensation.
What it consists of
As mentioned before, on-target earning consists of a base salary and commissions. Every company can have its own percentage of each constituency of OTE. The standard norm is 50% of base salary and 50% of on-target commissions.
While applying for the job, you should ask the hiring manager about average earnings. Make sure that it will be possible for you to hit 100% of your quota. Suppose employers in this company rarely hit the estimated on-target commission percentage. In that case, your salary will likely be lower than what is written in your job application.
Remember that many sales jobs require extra working time, and OTE often does not include the money for ramp time. However, reasonable employees will make a commission quota for possible overtime work. There would be no drastic difference between those two quotas.
Benefits of using it
As you may have already noticed, OTE is quite beneficial for businesses. One of the most obvious benefits of OTE is that it allows businesses to manage their finances following the outcomes they expect from their employees. This system increases workers’ productivity and helps establish long-term relationships in companies. Moreover, it reduces employees’ poor performance and promotes businesses development and growth.
An on-target earnings system allows companies to forecast their commissions and give an appropriate sales representative payment. Suppose the company manages OTE properly and puts realistic numbers in the job ad. In that case, it will give you a better understanding of your future earnings.
When applying for a sales position, it is important for you to know what OTE is to avoid any misunderstandings and undesirable complications. For better understanding, look at a few examples showing how the system works in practice.
Examples
When you see that the sales position states an OTE of $150,000, it means that the base salary for one year is $78,000. The quota for the month will be $60,000, with 15% of commissions per sale. As a result, if you reach 100% of your monthly quota, you will earn $6,000 in commission per month and $72,000 per year.
| Base | Sales per month | Commission | Earnings per month |
| 6,500 | 0 | 0 | 6,500 |
| 6,500 | $15,000 | $2,250 | $8,750 |
| 6,500 | $25,000 | $3,750 | $10,250 |
| 6,500 | $35,000 | $5,250 | $11,750 |
| 6,500 | $45,000 | $6,750 | $13,250 |
| 6,500 | $55,000 | $8,250 | $14,750 |
| 6,500 | $65,000 | $9,750 | $16,250 |
| 6,500 | $75,000 | $11,250 | $17,750 |
| 6,500 | $85,000 | $12,750 | $19,250 |
| 6,500 | $95,000 | $14,250 | $20,750 |
| 6,500 | $105,000 | $15,750 | $22,250 |
| 6,500 | $115,000 | $17,250 | $23,750 |
If the on-target earnings are $90,000, your base salary will be $46,800. The monthly quota for OTE of $90,000 is $36,000, which equals 9% of the commission on the sale. You will get $3,600 in commission every month and $43,200 every year. You should also take into account that most of the time, hiring managers round on-target earnings numbers for convenience. If you see OTE at $100,000, it can be $100,120 in practice.
