Define: OTE

UK Accounting Glossary

Definition: OTE


Quick Summary of OTE


OTE is on target or on track earnings. This is a term that will often be found in an advertisement for a job, especially when the advertisement is recruiting salespeople. Normally the pay structure will have two parts to it, a fixed part of the income and then a fixed sum or percentage of the



What is the dictionary definition of OTE?

Dictionary Definition


Definition OTE: On target earnings.

OTE is the earnings that you will receive if you meet your targets.

Often companies will offer OTE (on target earnings) if an employee has sales targets to meet.


Advertisement



Full Definition of OTE


OTE is on target or on track earnings.

This is a term that will often be found in an advertisement for a job, especially when the advertisement is recruiting salespeople.

Normally the pay structure will have two parts to it, a fixed part of the income and then a fixed sum or percentage of the commission, together these will be referred to as the package.

There will be a contract between the salesperson and the company that will clarify how much commission a person will make on sales, or if they will receive a fixed lump sum. Sometimes it will contain a combination of both, a fixed lump sum and a percentage of the commission on sales made.

These will be obtainable if the salesperson meets or exceeds their targets. All commission plans will be unique to the company that you are working for, however, often it is that the further an individual exceeds their targets the higher they commission that they receive.

Moreover, on target earnings (OTE) can refer to the earnings managers or directors can achieve if they meet certain goals or hit specified targets in the correct time-frame.

OTE can also be used as a definition for annual goals and targets.

Benefits to OTE (on target earnings)

OTE (on target earnings) is used by employers to benefit their employees for their hard work. However, it should be noted that often OTE also has a positive impact on employee engagement and employee motivation. OTE is a great way to improve the productivity of your salespeople.

OTE  (On target earnings) synonyms

The only known synonym for on target earnings is on track earnings, also abbreviated to OTE.

An example of OTE

If your salesperson has a salary of £30,000 a year and makes a commission of £15,000 in that year their OTE (on track earnings) could be expressed as £45,000 a year.

What would be considered a good OTE?

Generally, one fifth is considered to be good OTE and is what should be expected. This means that if a salesperson has an annual sales quota of £700,000 their on target earnings should be around £140,000 a year.

What is often considered to be the ‘ideal’ is between 6 and 8 times the sales quota.

Please note, that these are only suggestions. The salary of your salespeople will change dependant on your industry, their skill set, how many steps there are in your sales process, how much revenue you get as well as many other factors.


Advertisement



Examples of OTE in a sentence


The Role

Account Manager/Sales Executive

On Offer:

  • Competitive Salary of £25,000 – £28,000
  • OTE 1st Year approx. £42,7500 – £58,000 (Commission uncapped)
  • Progression opportunities available

OTE FAQ's


What does OTE stand for in terms of salary?

OTE, or on target earnings is used when there is a variable component to someone’s wages.

You will normally receive a base salary and then if you meet or exceed your targets you will receive a commission or a lump sum.

Generally, the further you exceed your targets the higher your commission.

The financial compensation that someone gets with OTE will be base salary, plus the commission or variable bonus and so on. OTE (on target earnings) is the term that is used to describe both of these components together.

Please note, that for many meeting the targets and achieving their OTE is a big ‘If’. If you achieve that, then you will financially be compensated for doing so.

Companies are known to set their targets high to push their sales team.

However, they would not publish high figures in a job advert if at least some of their sales staff were not meeting those targets.

Often a company will have a tiered system to compensate their salespeople, meaning that you can achieve a commission if you slightly exceed or meet your sales target, yet the more you do so the higher the commission you will receive.

How is OTE calculated?

OTE is a financial remuneration for services, often in sales.

It is calculated by adding the base salary to the commission or fixed sum that is received once meeting or exceeding targets.

Often, when an advert is posted for a job, it will state the OTE.

OTE can be got once reasonable targets have been met or exceeded.

How does OTE work in sales?

OTE (on target earnings) is the expected earnings you will receive in your first year when you meet your sales quota.

When evaluating whether to apply for a job it can be difficult to determine whether or not to go for it when considering the OTE, as sometimes it is not always attainable.

Moreover, your OTE is not guaranteed earnings, you will need to satisfy certain criteria to get this.

The criteria will vary dependant on the terms and conditions laid out by your employer. It is advised that you understand how to achieve your OTE before you decide to accept a job offer.

How do you calculate sales target salary?

Take your expense/salaries expense and include any benefits you receive, then divide the number you arrive at by the gross sales.

Normally, this will be the top line in your profit and loss statement. This new number you should multiply by 100 and you should arrive at 9%.

Is OTE a word?

No. OTE is an acronym, it stands for on target earnings or is sometimes used as on track earnings, both meaning the same.

You will not be able to use OTE when playing scrabble.


Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/ote/
Modern Language Association (MLA):
OTE. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. September 17, 2019 https://payrollheaven.com/define/ote/.
Chicago Manual of Style (CMS):
OTE. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/ote/ (accessed: September 17, 2019).
American Psychological Association (APA):
OTE. PayrollHeaven.com. Retrieved September 17, 2019, from PayrollHeaven.com website: https://payrollheaven.com/define/ote/

Definition Sources


Definitions for OTE are sourced/syndicated from:


This glossary post was last updated: 29th May 2019.