On-target earnings (OTE)

Candidates compare OTE between offers, so a poorly set figure costs either cash or the hire. A low base with high commission keeps fixed costs down and rewards closers, but it scares off strong candidates who worry about the months before deals close. The figure also has to make commercial sense. A common rule of thumb sets quota at four to six times OTE, so the role pays for itself well before it pays out in full.

• Decide the single OTE number first, then the split between base and commission.
• Match the split to the role. An experienced closer may prefer more commission, while a first hire in a new market may need more base.
• Set quota at four to six times OTE as a starting point, then adjust for deal size and the length of the sales cycle.
• Write the commission rules in plain language before the offer goes out: what triggers payment, the rate above quota and how part-quarters are treated.

OTE is the headline figure in a sales job offer. It is the base salary plus the commission a person earns if they hit their quota exactly. It is not guaranteed. The base is paid regardless, and the commission depends on results.

Say OTE is £60,000 split 50/50. The base is £30,000 and the target commission is £30,000. If the quota is five times OTE, that is £300,000 of new annual contract value, so the commission rate is £30,000 divided by £300,000, or 10 per cent. A rep who closes £150,000 would earn about £15,000 commission, on top of the base.

• Advertising OTE that few reps reach. If most of the team misses quota, the real earnings are lower than the advert says.
• Paying commission on a verbal yes instead of a signed contract.
• Ignoring ramp time for a new hire, who needs months to reach full productivity.