How do you calculate On-Target Earnings?

The basic formula for OTE is: OTE = Base salary + Target variable pay at 100% performance. For example, if someone has a base salary of $70,000 and can earn $70,000 in commission at quota, their OTE is $140,000.

Why is OTE important in compensation plans?

OTE sets clear expectations about total potential earnings when targets are achieved. It helps attract and retain talent, align roles with company goals, and gives Finance, HR, and Sales a common baseline for modeling cost and performance.

What is a typical pay mix for OTE in sales roles?

A common pay mix for quota-carrying sales roles is 50% base salary and 50% variable pay at target, although mixes like 60/40 or 70/30 are also used depending on role seniority, risk, and market norms.

How can Bentega help with OTE planning?

Bentega lets you model OTE levels and pay mixes, connect them to quotas and commission rules, and give each employee clear visibility into how performance translates into earnings.

On-Target Earnings (OTE): Meaning, Formula & Examples

Q: What is On-Target Earnings (OTE)?

On-Target Earnings (OTE) is the total expected annual pay for a role when the person hits 100% of their performance goals. It combines base salary with target variable pay such as commission or bonuses.

On-Target Earnings (OTE) shows up everywhere – in job ads, offer letters, and headcount plans. But inside many teams, it’s still a fuzzy number: half market benchmark, half negotiation.

This guide explains what On-Target Earnings (OTE) means, how to calculate it, and how to design realistic OTE plans for SaaS teams across Sales, Customer Success and go-to-market leadership.

If you prefer a quick primer before diving into the full framework, start with our article On-Target Earnings (OTE): what it is and how to use it.

If you’re ready to turn OTE decisions into a living compensation engine, you can also model any incentive compensation plans directly in Bentega’s incentive compensation software.

What is On-Target Earnings (OTE)?

In job descriptions and offer letters, you’ll often see a total figure called OTE. That’s where people start asking, “So… what is OTE in this salary package?”

On-Target Earnings (OTE) is the total expected annual pay for a role when the person hits 100% of their performance goals.

In practice, OTE combines:

Base salary – the guaranteed component
On-target variable pay – commission, bonus, or other incentive at target

If a SaaS AE has a base salary of $70,000 and can earn $70,000 in variable pay at quota, their OTE is $140,000 with a 50/50 pay mix.

When you publish an “OTE salary” in a job description, you’re really publishing the combination of those two parts – which means you need to be very clear about how realistic it is to hit that number and how the variable piece works.

On-target earnings (OTE) only really works when it fits inside a clear incentive compensation strategy. If you’re still designing the overall framework, start with our overview of modern incentive compensation software and how RevOps teams use it to keep plans consistent and auditable.

Why OTE matters

Well-designed OTE is a bridge between strategy, performance, and pay:

For candidates, OTE sets expectations about upside, stability, and risk.
For leaders, OTE is how you connect company targets to individual pay.
For Finance, OTE is a core input into headcount, CAC and profitability.
For HR & RevOps, OTE is the starting point for consistent, auditable plans.

If OTE is misaligned, you’ll feel it everywhere: missed quotas, over-spend on commission, and churn from high performers. For a deeper look at why OTE is so central to modern comp plans, see why On-Target Earnings (OTE) in compensation plans is key.

Does OTE include base salary?

One of the most common questions from candidates and managers alike is, “does OTE include base salary?”

Yes. By definition, OTE includes both base pay and the on-target incentive component. When you present a compensation package, you should always show:

Base salary
On-target variable (commission/bonus)
OTE (base + on-target variable)

For example: “$90,000 OTE, 60/40 mix” typically means $54,000 base and $36,000 on-target variable.

To avoid confusion, don’t rely only on the OTE headline. Spell out the components, explain how the plan works, and link to your commission structure so people can see how earnings are calculated in practice.

OTE formula (and what it actually tells you)

The core formula is simple:

OTE = Base Salary + On-Target Variable Pay

As long as you know the base and the on-target incentive, you can calculate OTE for any role.

You can think about it alongside other pay concepts like this:

Base salary – the guaranteed amount, regardless of performance.
OTE – what the employee is expected to earn at 100% performance.
Total compensation – what they actually earn in a given year (which may sit below or above OTE depending on attainment).

Quick OTE examples

Example 1: Mid-market AE (50/50)

Base salary: $80,000
On-target variable: $80,000
OTE: $160,000 (50/50 pay mix)

Example 2: SDR / BDR (70/30)

Base salary: $49,000
On-target variable: $21,000
OTE: $70,000 (70/30 pay mix)

For a full walkthrough with step-by-step math and scenarios, follow our guide on how to calculate On-Target Earnings (OTE) in compensation plans.

In both cases, OTE is a target, not a guarantee. Actual earnings will move with performance against quota or KPIs.

Want to see what this looks like at 80%, 100% and 120% attainment? Use our free On-Target Earnings (OTE) calculator to model your own numbers.

OTE vs base salary and total compensation

A lot of confusion comes from mixing up these terms:

Does OTE include base salary?
Yes. By definition, OTE includes both base pay and the on-target incentive component.
Does OTE include equity and benefits?
Usually not. Equity, benefits and one-off bonuses typically sit outside OTE and roll up into total compensation.
Can total comp exceed OTE?
Yes. If you introduce accelerators or uncapped commission, top performers can earn well above OTE.

A clean offer letter or plan doc will always show:

Base salary
On-target variable pay
OTE (base + on-target variable)
How and when variable pay is calculated and paid

Typical OTE pay mix by role (B2B SaaS)

Most teams don’t reinvent OTE from scratch each time they open a new role. Instead, they use a standard OTE pay mix by role and adjust for market, seniority, and deal complexity.

Here’s how OTE by role typically looks in B2B SaaS:

Role	Typical Pay Mix	Notes
SDR / BDR	70/30	Activity & meetings; smaller variable for predictability.
Account Executive (AE)	50/50	Quota-bearing; strong upside via accelerators.
Customer Success Manager (CSM)	80/20	Retention/expansion; variable tied to NRR/GRR.
Sales Manager	60/40	Team attainment + coaching KPIs.
VP of Sales	70/30	Company growth metrics; less transactional.

SDR / BDR

SDR and BDR roles are usually focused on pipeline generation, meetings booked, and early-stage opportunity creation. A 70/30 mix keeps income relatively stable while still rewarding consistent activity and quality.

Account Executive

Account Executives carry revenue quotas and have clear line-of-sight to closed-won deals. A 50/50 mix aligns their earnings directly with revenue while still providing enough base salary for stability. When people talk about OTE in sales, this is often the profile they have in mind.

Customer Success Manager

Customer Success Managers typically own renewals, net revenue retention, and expansion targets. An 80/20 mix reflects their blend of relationship-building and commercial responsibility. Variable pay is often tied to NRR/GRR, upsell, and cross-sell.

Sales Manager

Sales Managers are leveraged leaders: their earnings should track team performance, not individual deals. A 60/40 mix tied to team attainment, process KPIs, and coaching effectiveness keeps incentives aligned.

VP of Sales

VPs and Heads of Sales are accountable for broader growth metrics: new ARR, net retention, and overall cost of sales. A 70/30 mix is common, with variable linked to company-level targets rather than transactional quotas.

For role-by-role guardrails on base/variable mix, see How to Structure OTE for Sales, Marketing & Customer Success Roles.

Use these bands as guardrails, not rules. The right mix depends on sales cycle length, role seniority, territory design and your risk appetite.

For a deeper look at commission mechanics, pair this guide with our overview of sales commission structures.

How to design an effective OTE plan

Good OTE design connects strategy, performance, and pay. Poor OTE design creates confusion, mistrust, and unnecessary turnover.

When you define OTE for a role, make sure your plan is:

Principle	Description
Clear	Everyone can explain how earnings are calculated and what “100%” performance means.
Attainable	Targets are challenging but realistic; most performers should land near OTE in a normal year.
Calibrated	Quota-to-OTE ratios make sense for your market and growth stage.
Motivating	Accelerators reward over-performance without turning the plan into a lottery.
Governed	Policies for caps, clawbacks, and exceptions are written down and consistently applied.
Fair	Territories, lead distribution, and opportunity access are equitable across the team.
Time-bound	Ramp periods are explicit so new hires aren’t penalized while they learn the role.
Connected	SPIFFs and short-term bonuses support the main plan instead of fighting it. To make sure the metrics behind your plan actually drive business results, use our guide on linking performance metrics and aligning OTE plans with goals.

Your OTE plan is only as good as the commission rules behind it. If you’re still working out how rates, accelerators and caps should behave at different attainment levels, our guide to sales commission structures walks through common models and when to use each.

You don’t have to solve all of this in a spreadsheet. Bentega helps you design, model, and govern incentive plans that are transparent for reps and manageable for finance.

Step-by-step: Designing OTE for a new role

Use this as a checklist when you’re setting OTE for a new or evolving role:

Define the mission of the role
What problem does this role solve? New ARR, renewals, expansion, pipeline?
Choose the main performance metric
Quota (revenue), bookings, NRR, GRR, qualified meetings, product usage, etc.
Set a target quota or KPI
Use historical data, market benchmarks and capacity assumptions to set an achievable target.

If you’re designing plans specifically for SaaS revenue roles, our article on implementing OTE in SaaS to drive growth and retention walks through how to tie OTE to ARR, MRR and NRR.
Decide on pay mix and OTE level
Based on seniority, risk profile and market data, choose an OTE and split between base and variable.

Use benchmarking OTE to stay competitive and attract top talent to sanity-check your numbers against market data.
Design the commission/bonus structure
Flat rates, tiers, accelerators and caps should all support the behaviour you want to see.
Run scenarios and stress-test
Model payouts at 50%, 80%, 100% and 150% attainment. Check that high performers are meaningfully rewarded and that Finance can live with the upside.
Document the plan
Share examples, edge cases and timelines. Make sure the plan can be audited and explained.

Tools like Bentega help RevOps and Finance teams move this from spreadsheets into a central, auditable system – with real-time visibility for leaders and payees.

Common mistakes in OTE design

Watch out for these patterns:

OTE that no one hits – looks good in a job ad, but leads to churn and distrust.
Pay mix misaligned with role risk – heavy variable for roles that can’t actually move the needle.
Over-complex tiers – 6–8 commission bands that nobody remembers or checks.
Hidden caps or clawbacks – buried in fine print rather than clearly spelled out.
No connection to company targets – OTE built in isolation from revenue plans and margin goals.

Fixing these usually means going back to first principles: who do we want to attract, what behaviours do we need, and what can we sustainably afford?

Two areas teams often overlook are risk and external conditions. For contract wording and cross-region compliance, read legal considerations in On-Target Earnings (OTE) plans. And if market conditions are shifting, pair this with our guide on adapting OTE during economic changes so your targets stay realistic.

What does OTE mean in salary?

OTE in a salary context refers to the total expected annual earnings at target – base salary plus on-target variable pay.

Is OTE guaranteed?

No. Base salary is guaranteed; the variable portion depends on actual performance against targets.

Can someone earn more than their OTE?

Yes. If your plan includes uncapped commission or accelerators, top performers can earn well above OTE.

To help employees really understand these nuances, use our guide on how to communicate OTE to employees effectively.

How often should we review OTE levels?

Most SaaS companies review OTE during annual planning, and again when there are significant changes in market, territory design or product mix.

For a full view of how OTE fits into reviews and ongoing coaching, see Aligning OTE with performance management for impact.

Does OTE include equity and benefits?

Typically no. Equity, benefits and one-off bonuses are handled separately and roll up into total compensation, not OTE.

Model OTE scenarios before you roll out a plan
Keep quota, attainment and payout logic in one place
Give leaders real-time visibility into plan cost and performance
Give reps and CSMs a clear view of how their earnings track against OTE

Key takeaways

OTE is the total expected annual compensation (base plus on-target variable) for a role at 100% performance.
The core formula is simple, but good OTE design depends on realistic quotas, clear communication, and a fair pay mix.
Typical pay mixes vary by role; AE 50/50 and SDR 70/30 are common anchors in B2B SaaS.
Use a structured approach to align OTE with performance management, SPIFFs, and governance so your plans stay fair and credible.
Tools like Bentega’s OTE calculator and commission engine make it easier to design, model, and administer plans across teams.

On-Target Earnings (OTE): How to Design OTE Your Team Can Actually Hit