On-Target Earnings (OTE) Calculator
Use this tool to calculate your On-Target Earnings (OTE). OTE represents the total expected compensation for a role if performance targets are met. It's typically the sum of your fixed Base Salary and your expected variable pay (like commission or bonus) at 100% of your target.
Calculate Your OTE
Understanding On-Target Earnings (OTE)
What is OTE?
On-Target Earnings (OTE) is a compensation term used to describe how much money an employee will earn in a year if they meet 100% of their performance goals or quotas. It's commonly used in sales roles but can apply to any position with variable pay components tied to specific targets.
The Simple OTE Formula
The calculation is straightforward:
OTE = Base Salary + Target Variable Compensation
Your Base Salary is the fixed portion of your income, paid regularly regardless of performance (e.g., monthly or bi-weekly). Your Target Variable Compensation is the amount of commission, bonus, or other incentive pay you are expected to earn *if* you achieve your goals. If your performance exceeds or falls short of the target, your actual variable compensation and thus your actual total earnings will differ from the OTE.
Examples Using the OTE Calculator
See how OTE is calculated in different scenarios:
Example 1: Standard Sales Role
Scenario: A sales representative has a fixed salary and a commission plan.
Input: Base Salary = $50,000, Target Variable Compensation = $40,000
Calculation: OTE = $50,000 + $40,000 = $90,000
Result: OTE is $90,000.
Example 2: Role with Smaller Bonus
Scenario: An employee has a large base salary with a smaller annual target bonus.
Input: Base Salary = $100,000, Target Variable Compensation = $10,000
Calculation: OTE = $100,000 + $10,000 = $110,000
Result: OTE is $110,000.
Example 3: Pure Commission Role (with minimal base)
Scenario: Some roles have a very low base salary and rely heavily on commission.
Input: Base Salary = $30,000, Target Variable Compensation = $70,000
Calculation: OTE = $30,000 + $70,000 = $100,000
Result: OTE is $100,000.
Example 4: Role with No Variable Pay
Scenario: An employee has a fixed salary and no commission or bonus plan.
Input: Base Salary = $75,000, Target Variable Compensation = $0
Calculation: OTE = $75,000 + $0 = $75,000
Result: OTE is $75,000 (equal to the base salary).
Example 5: Calculating from Monthly Figures
Scenario: Your offer lists a $5,000 monthly base and $1,500 monthly target commission.
Input (Annual): Base Salary = $5,000 * 12 = $60,000, Target Variable Compensation = $1,500 * 12 = $18,000
Calculation: OTE = $60,000 + $18,000 = $78,000
Result: OTE is $78,000.
Example 6: Using Decimal Values
Scenario: Inputs might not always be whole numbers.
Input: Base Salary = $52,500, Target Variable Compensation = $27,750
Calculation: OTE = $52,500 + $27,750 = $80,250
Result: OTE is $80,250.
Example 7: High Commission Percentage Role
Scenario: A role with a moderate base but high potential variable pay.
Input: Base Salary = $45,000, Target Variable Compensation = $55,000
Calculation: OTE = $45,000 + $55,000 = $100,000
Result: OTE is $100,000.
Example 8: Executive Bonus Structure
Scenario: An executive role with a high base and a significant target bonus.
Input: Base Salary = $150,000, Target Variable Compensation = $50,000
Calculation: OTE = $150,000 + $50,000 = $200,000
Result: OTE is $200,000.
Example 9: Entry-Level Role with Small Bonus
Scenario: An entry-level position might include a small performance bonus.
Input: Base Salary = $40,000, Target Variable Compensation = $2,500
Calculation: OTE = $40,000 + $2,500 = $42,500
Result: OTE is $42,500.
Example 10: Using Large Numbers
Scenario: Calculating OTE for a high-earning position.
Input: Base Salary = $120,000, Target Variable Compensation = $80,000
Calculation: OTE = $120,000 + $80,000 = $200,000
Result: OTE is $200,000.
Frequently Asked Questions about OTE
1. What does OTE stand for?
OTE stands for On-Target Earnings. It represents the total compensation you can expect to earn if you meet 100% of your performance targets.
2. How is OTE calculated using this tool?
This tool calculates OTE by simply adding your annual Base Salary to your annual Target Variable Compensation.
3. What is the difference between Base Salary and Target Variable Compensation?
Base Salary is your fixed, guaranteed income. Target Variable Compensation is the amount of pay (like commission or bonus) you *expect* to earn if you hit your goals. It is not guaranteed.
4. Is OTE guaranteed income?
No, OTE is not guaranteed. It's a projection based on achieving 100% of your targets. Your actual earnings may be higher (if you exceed targets) or lower (if you miss targets).
5. What if my variable pay is calculated monthly or quarterly?
This calculator uses annual figures. If your variable pay is monthly or quarterly, you need to calculate your *annual* target variable compensation first (e.g., monthly target x 12, or quarterly target x 4) before using this tool.
6. Does OTE include benefits or expenses?
Typically, OTE refers only to the combination of base salary and target cash compensation (commission, bonus). It usually does not include the value of benefits (health insurance, retirement plans) or expense reimbursements.
7. What if my commission structure has accelerators or decelerators?
This basic calculator does not account for complex variable pay plans like accelerators (higher rates for exceeding target) or decelerators (lower rates for missing target or below a threshold). It calculates based on the *target* variable amount only.
8. Are taxes deducted from OTE?
OTE is a gross earnings figure (before taxes). This calculator does not deduct taxes or other withholdings.
9. Can I use this to calculate OTE if I only know my base salary and commission *rate*?
You'll first need to determine what 100% of your target performance would generate in variable pay based on your commission rate. For example, if your target is $500k in sales and your commission rate is 10%, your Target Variable Compensation is $50k ($500k * 0.10). Then you use that $50k in the calculator.
10. Why is OTE important?
OTE provides a clear picture of the total earning potential of a role, helping candidates evaluate job offers and companies communicate compensation structures transparently.
