On-target earnings (OTE)
On-target earnings (OTE) is the total annual pay a salesperson earns at exactly 100% of quota: base salary plus target commission or bonus. A $200,000 OTE with a 50/50 split means $100,000 base and $100,000 variable. OTE is a target, not a guarantee; actual pay rises or falls with quota attainment.
OTE is not guaranteed. It is the expected outcome when a rep performs at plan. A rep who hits 80% of quota earns less than OTE; a rep who hits 120% can earn more, especially if accelerators are in place. This distinction matters most in recruiting conversations, where candidates often treat OTE as a floor instead of a target. RevOps and sales leaders need to be explicit: OTE assumes 100% quota attainment, nothing more.
OTE also shapes how companies think about sales hiring costs. If you plan to hire 10 AEs at $200K OTE with a 50/50 split, you are committing to $1M in base salary plus $1M in variable if every rep hits plan. That math feeds headcount budgets, hiring timelines, and revenue capacity models. Set OTE too low and you cannot hire; set it too high and comp costs outrun revenue. Either mistake takes quarters to unwind.
How to calculate it
Formula
OTE = Base Salary + Target Variable (Commission at 100% quota)
Target Variable is the commission a rep earns when they close exactly their quota number. It does not include accelerators, bonuses, or SPIFFs. Base salary is fixed regardless of performance; target variable scales with attainment up to and beyond 100%.
Variables
- Base Salary
- The fixed annual cash payment made to the rep regardless of quota attainment. Typically paid bi-weekly or semi-monthly.
- Target Variable
- The at-risk portion of total cash compensation paid when the rep achieves 100% of their assigned quota. Also called 'target incentive' or 'variable pay.'
- OTE Split
- The ratio of base to variable. A 60/40 split means 60% base, 40% variable. Expressed as base/variable or sometimes variable/base, so confirm which convention a company uses.
Worked example
Worked example using The Bridge Group's medians: its 2026 AE report puts median AE OTE at $200,000 and median quota at $960,000, and its 2024 report found a 53:47 base-to-variable split. Applied together, that is about $106,000 base and $94,000 target variable. The implied commission rate is $94,000 / $960,000, or about 9.8% of bookings. At 80% attainment ($768,000 closed), a rep on a linear plan earns about $75,200 variable, for $181,200 total cash, below OTE. At 120% with no accelerator, they earn about $112,800 variable and $218,800 total.
Why it matters
Teams that leave OTE undefined or inconsistent across roles struggle to recruit competitively and model compensation costs accurately. When a VP of Sales posts a role with 'OTE $180K' without specifying the split, quota, or attainment history, candidates fill in the gaps, and they usually guess high. The result is early attrition when reps discover the quota is rarely achievable, and each failed hire costs recruiting fees, months of ramp, and lost pipeline. The Bridge Group's 2026 AE report puts average ramp at 6.2 months, so a bad-fit hire can burn half a year before anyone knows.
OTE is also the anchor point for every other compensation design decision. Accelerators are set as multiples of OTE. Clawback policies reference OTE thresholds. Pay equity reviews compare OTE across roles and regions. If OTE is too high relative to market, or the split doesn't match role risk, the comp plan is off before a single deal closes. RevOps should revisit OTE at least annually against current market data.
Benchmarks
- Median AE OTE: $200,000 (up from $190K in 2024 and $167K in 2022) (The Bridge Group, AE Models, Motions & Metrics (2026), 158 B2B companies)
- Median AE quota and quota-to-OTE ratio: $960,000 quota; 4.6x OTE (The Bridge Group, AE Models, Motions & Metrics (2026))
- AE base-to-variable split: 53:47 (The Bridge Group, SaaS AE Metrics & Compensation (2024), 170+ SaaS companies)
- SDR OTE (median): $80,000, split 68:32 ($55K base / $25K variable) (The Bridge Group, SDR Models, Motions & Metrics (2025), 351 B2B companies)
- Share of AEs at or above quota: 48% (The Bridge Group, AE Models, Motions & Metrics (2026))
- Enterprise AE OTE range: $150,000 to $300,000 (Rule of thumb, not a published study)
- Mid-market AE OTE range: $120,000 to $200,000 (Rule of thumb, not a published study)
How teams use it
OTE ranges by role, as a starting point: SDRs sit around $80,000 median OTE with roughly two-thirds of pay in base (Bridge Group 2025). Full-cycle AEs sit around $200,000 median OTE with close to half at risk (Bridge Group 2026 and 2024). Enterprise AEs selling six-figure deals often run above that median and mid-market AEs below it; treat the enterprise and mid-market ranges in the benchmarks table as rules of thumb and check them against current offer data for your segment before posting a role.
When posting a role, always state the OTE, the split, the quota, and the historical attainment percentage for the team. A posting that says '$200K OTE, 50/50 split, $1.2M quota, 58% of reps at or above plan last year' gives candidates the information they need to evaluate the opportunity honestly. This transparency reduces interview drop-off and filters out candidates who need a higher floor.
During comp plan design, set OTE before setting quota. Determine what you need to pay to attract the talent profile you want, then back-calculate the quota required to deliver the target variable at an acceptable commission rate. Starting with quota and working backward to OTE often results in a mismatch where either quota is too high or OTE is too low for the market.
Build an OTE corridor, not a single number. High-cost markets such as San Francisco and New York usually pay above national medians. Remote roles add a wrinkle: some companies pay location-adjusted OTE, others pay a single national rate. Document the policy clearly in the comp plan and apply it consistently to avoid pay equity issues that surface during HR audits or employee conversations.
Common mistakes
Inflated OTE in job postings
Posting an OTE that requires top-decile attainment to achieve creates early attrition. Reps who join expecting $220K and earn $160K in year one leave by month 10, costing the company their ramp investment and forcing another hire cycle.
Mismatched OTE splits by role
Giving an SDR a 70/30 split treats a role with limited deal control like a full-cycle AE position. SDRs typically see 80/20 or 75/25; pushing too much at-risk pay into early-stage roles increases turnover and reduces pipeline volume.
OTE not updated for market shifts
The Bridge Group's data shows median AE OTE rising from $167K in 2022 to $200K in 2026, about 20% in four years. A company still using 2022 numbers is well below market. Top candidates with competing offers take the higher number, and existing reps begin passive job searches when they discover the gap through peer networks.
No distinction between OTE and max earnings
Candidates often ask 'what can I make?' If reps have no accelerators, OTE is also their ceiling, which puts off high performers who expect upside. Failing to design and communicate uncapped upside (or realistic caps) drives top reps to competitors with better comp architecture.
Tools for modeling OTE and payouts
OTE modeling starts in spreadsheets but soon needs dedicated sales compensation software to manage plan documents, quota assignments, attainment tracking, and payout calculations at scale. CRM data feeds attainment; compensation platforms automate payout and provide rep-facing dashboards so reps can see projected earnings in real time.
Frequently asked questions
What is OTE pay?
OTE pay is the total cash a salesperson earns in a year if they hit exactly 100% of quota: base salary plus target variable pay. If a job ad says '$150K OTE, 60/40', the base is $90,000 and the rep earns another $60,000 in commission at full quota.
What are on-target earnings?
On-target earnings are the expected annual pay for a quota-carrying role at 100% attainment. The figure combines fixed base salary with variable commission or bonus, and excludes equity, benefits, and one-off bonuses such as SPIFFs or signing bonuses.
What is a typical OTE range?
It depends on role. The Bridge Group reports a median SDR OTE of $80,000 (2025) and a median AE OTE of $200,000 (2026). Enterprise AEs usually sit above the AE median and SMB or mid-market AEs below it. Always check the split and the share of reps hitting quota, since 48% of AEs reached quota in Bridge Group's 2026 data.
What is a good OTE benchmark for SaaS AEs?
The Bridge Group's 2026 AE report puts median AE OTE at $200,000 with a $960,000 median quota, a 4.6x quota-to-OTE ratio. Use that as the midpoint and adjust for deal size and location: enterprise roles selling large deals pay more, SMB roles less. Cross-reference current offer data from sources such as RepVue or recruiters in your segment.
How does OTE affect quota setting?
OTE and quota are directly linked through the commission rate. If you set OTE at $200K with a 50/50 split ($100K variable) and a $1M quota, the implied commission rate is 10%. If you later raise OTE to $240K without raising the quota, the commission rate jumps to 12%, increasing your CAC. Sales planning should model OTE-to-quota ratios before finalizing either number, not in isolation.
Is OTE the same as total compensation?
No. OTE typically refers to total cash compensation (base plus target variable) at 100% quota attainment. It usually excludes equity (RSUs, options), benefits, 401K match, and any one-time signing bonuses. When evaluating a total compensation offer, candidates should add equity value and benefits separately. RevOps teams modeling comp costs should similarly distinguish between OTE (cash) and total comp (cash + equity + benefits).
What OTE split should we use for different sales roles?
Role risk and deal influence should drive the split. SDRs, who have no direct deal control, typically see 75/25 or 80/20 (base/variable). Full-cycle AEs with quota ownership typically see 50/50 to 60/40. Sales engineers and customer success managers who influence expansion but don't own a quota often see 70/30 to 80/20. Channel or partner managers, who depend on external partners closing, are often closer to 70/30. The more direct control a role has over revenue, the higher the variable proportion can reasonably be.
How often should we review and update OTE?
At minimum, annually during comp plan season, typically Q4 for plans effective January 1. However, if hiring is stalling because candidates are declining offers citing comp, or if you lose multiple reps in a quarter to competitors with higher OTE, those are signals to do an off-cycle review. Market benchmarks from Radford, OpenComp, and Betts update quarterly, so the data is available to justify mid-year adjustments when needed.