Understanding OTE: On-target earnings
It's important that job seekers understand the particulars of compensation plans and packages. One important term is on-target earnings or OTE. OTE is a salary model many companies follow to motivate their sales team. OTE is your expected total pay, which includes your fixed salary and variable income. Knowing how companies apply on-target earnings can help you maximize your salary potential.
This article explains what on-target earnings include, explores the different types of OTE, discusses why OTE is important in your job search process, provides you with examples, and teaches you how to calculate your OTE. Here's what the article will cover:
What is on-target earnings?
OTE defines your maximum salary when your pay mix includes a base salary plus bonuses and on-target commissions. OTE is a metric that represents your total annual salary if you stay on target or exceed your performance goals.
Types of OTE salary
Here are the different types of OTE salary you can earn:
- Capped: Having capped OTE limits the total earnings you can receive, even if you exceed the targets a company sets.
- Uncapped: When a company offers uncapped OTE, there's no ceiling to the total amount you can receive. You stand to earn more if you perform well and exceed targets.
- OTE commissions: Companies typically base OTE commissions on how you perform, such as achieving or surpassing sales quotas.
Roles that usually include OTE salary
Here are some common roles that can earn OTE:
- In some sales rep jobs, your earnings depend on sales, such as closing a specific number of clients or achieving sales quotas.
- In some retail management roles, your OTE depends primarily on how the branch you manage performs.
- In marketing management positions, your salary and bonuses may depend on the revenue the marketing team generates.
Payment
OTE payments may vary. Some firms pay commissions and bonuses quarterly, while others use annual or monthly cycles. It's important to learn and understand your prospective workplace's OTE targets and salary schedule to manage your financial expectations effectively.
Benefits of OTE
An established and efficient OTE compensation plan benefits employers and employees in the following ways:
- Rewards employees for hitting quotas: OTE commission can motivate you to strive for and exceed your performance targets. OTE payments reward you for your hard work and dedication.
- Increases employee engagement and motivation: Knowing that a company appreciates your efforts makes you more motivated and eager to participate in the sales process and focuses you on achieving goals. An effective compensation package aligns your success with company growth, creating a mutually beneficial relationship.
- Allows job seekers to make informed career decisions: Many job seekers look for OTE potential when applying for jobs. Understanding these figures helps you compare roles and evaluate each job offer you receive.
- Attracts and retains the best employees: Companies offering competitive OTE packages attract more potential employees and retain the best staff. High-performing employees typically prefer companies that impact their financial success.
- Allows for easier sales commission forecasting: When companies use an OTE system, their leadership and accounting teams can accurately forecast sales commissions. OTE salary systems also help companies manage long-term planning and sustainability budgeting.
How do you calculate OTE?
Here's the formula for calculating OTE:
OTE = base salary + variable components (commissions and bonuses)
- Base salary: Your base salary is the fixed amount you regularly receive (monthly or annually).
- Variable components: These include commissions, bonuses, and other performance-based incentives. You earn these salary additions when you achieve specific targets or exceed predefined quotas.
For example, if your monthly base salary is ₱20,000 and you earn an additional ₱2,000 in commissions and bonuses, then your monthly OTE is ₱22,000. Here's the resulting equation: ₱22,000 (OTE) = ₱20,000 (base salary) + ₱2,000 (commissions and bonuses).
OTE is not guaranteed
OTE is the potential for extra earnings in addition to your fixed base salary. You only receive it when you meet or exceed specific performance targets, so OTE is not a guaranteed payment. If you fail to meet your sales quota, you'll still receive your base salary. This pay structure adds some control to your pay, motivating you to achieve your targets.
Tips for achieving your OTE
Here are tips that can help you achieve your OTE:
Develop a plan for getting OTE
Determine what you need to do at work to get your OTE. Set these as your goals. You might need help to achieve set goals and targets when you work under an OTE pay structure for the first time. Here are some tips:
Set micro goals
Don't let set goals overwhelm you. Break them down into smaller, achievable milestones. Changing your perspective makes your overall objective more manageable. Achievable targets help you monitor your progress and make necessary changes.
Organize tasks
Efficiently organize your tasks and prioritize activities that directly contribute to meeting quotas. Don't create a backlog of daily tasks, as this will distract you from achieving your goals. Create a to-do list at the start of each day to track your activities. Check that you've ticked everything off your list before you finish work for the day.
Reach your quota
Here are several tips that can help you reach your quota and achieve your OTE:
Understand your quota
Clearly understand your targets. There are different types of quotas. The traditional quota requires you to sell a preset amount of a product or service monthly, quarterly, or annually.
The activity quota requires you to perform an activity, such as reaching a set number of calls or contacts daily. The team-based quota motivates all team members to achieve a set sales amount to receive an incentive.
Ask for referrals
Many sales reps forget about an account once they hand the client over to the account manager. They then move on to the next account. It is worth having frequent check-ins with the clients to track project progress. This also helps get realistic feedback while engaging them on an ongoing basis.
If you receive poor feedback, try to find a remedy. If the client offers a positive response, ask them to recommend your business to their friends, as a satisfied client can provide endless referrals.
Keep track of your goals
Keeping track of your progress helps you to stay focused on your objectives. You can create a handwritten or virtual list and then cross off a goal when you achieve it. This allows you to determine if you're on track to getting your OTE and what else you need to do to get there.
Improve your productivity
Give yourself a higher chance of meeting your quota by improving your productivity at work. Try these tips:
Avoid multitasking
Although many people multitask skillfully, focusing on one task or activity usually makes you more productive. Transitioning between many tasks uses more of your time. Multitasking may result in finishing some tasks haphazardly or delivering a lower quality of work. For instance, when you need to make calls and send follow-up emails, complete the jobs one at a time.
Take regular breaks
Most workplaces have a regular break schedule. In these workplaces, employees can take short breaks between every few hours of work in addition to their lunch breaks.
Some people skip these breaks, thinking they can finish more work and close more sales. Missing your breaks can affect your overall productivity, resulting in burnout or fatigue. Short breaks allow you to clear your mind, recharge, and prepare.
Build a better to-do list
Being productive doesn't mean you should schedule more tasks in a day than anybody else. Prioritize your tasks from most important to tasks that have a lower priority. Choose a few tasks daily that you want to progress and start from there.
Minimize distractions
There are two kinds of workplace-related distractions – self-imposed and environmentally imposed. Self-imposed distractions are those you can control, such as notifications you receive that you can turn off. You have no control over environmentally imposed distractions, such as a colleague dropping by your workstation. Set up an autoresponder if you can't turn off email notifications and switch to a “do not disturb” mode on your phone and instant message platform.
Refine your workstation
Organize your workspace by arranging paperwork and decluttering your desk. Keep things that you often need where you can reach them. Place items you rarely use in your drawer. Keep your workstation clean and clutter-free.
On-target earning examples
Here are a few examples to help you better understand the concept of OTE:
Sales representative
A sales rep serves as a point of contact for one-off sales. Their average earnings are typically around ₱275,000 annually. They usually earn a commission of 10% per sale if they meet their total annual sales quota.
Account manager
An account manager usually works with clients for longer sales cycles. Their annual average base salary is between ₱450,000 and ₱600,000, and their average annual commission can be up to ₱70,000. Their targets often depend on retaining their existing clients and attracting new ones.
Sales manager
A sales manager is in charge of hiring sales reps and sales leaders. Their targets may vary depending on team sales budgets or team sales achievements. On average, a sales manager receives an annual base salary between ₱500,000 and ₱700,000, with commissions up to ₱60,000.
Marketing manager
A marketing manager usually receives incentives or bonuses. Their targets often depend on how many new clients result from their marketing strategies and whether their marketing campaigns are successful. A marketing manager may receive a base salary of around ₱600,000 annually, with bonuses starting at ₱50,000.
Conclusion
Understanding OTE is important for professionals in performance-driven roles. While OTE has an element of unpredictability, it presents significant opportunities for increased income through excellent performance. By setting achievable goals, staying organized, and improving work productivity, you can maximize your chances of achieving your OTE salary. Learn what OTE and commission systems companies use so that you can make informed choices and thrive in your chosen career.
FAQs
- Is OTE on top of salary?
Your OTE commission rate is not part of your base salary. You receive OTE payments if you meet your sales quota or achieve a set level of performance. When applying for jobs, ask your interviewer about the company's OTE commission model to make sure that the key performance indicators (KPIs) are realistic and achievable. - Is OTE guaranteed?
OTE isn't a guaranteed payment. To earn it, you need to meet performance targets. When applying for a position with OTE, inquire about employees' average performance quotas to determine if you can meet the company's KPIs. - Is OTE the same as commission?
The calculation for OTE is your base salary plus commissions you earn by meeting targets. You earn a commission if the company uses an OTE model. - Are on-target earnings realistic?
Yes, but choose companies that have a workable OTE model – one where targets and quotas are achievable. - What is the average OTE for a sales rep role?
On average, the OTE for sales reps is between ₱275,000 and ₱350,000. The figures vary depending on the specifics of the role, sales targets, and company. - What does 200k OTE mean?
200k OTE is the total pay you might expect to earn per year if you meet targets and KPIs. This figure includes your base salary and the commissions you earn from hitting your targets. - What's the difference between OTE and a bonus?
OTE includes your base salary and the commissions you make by meeting targets. You receive bonuses at the company's discretion. For example, you might receive a bonus for loyalty or if the business is growing. Bonuses may not be directly related to your performance.
