Some terms are peculiar to a certain field which is why each field has its jargon. Talking about “On Target Earnings” OTE, is mostly used by people in sales or marketing. This means that anyone working as a sales personnel or a marketer tends to be familiar with the concept. Most times, OTE is used in a contract signed by these professionals but considering that not everyone is an island of knowledge, we will do well to tell you what you need to know.
What is OTE (On Target Earnings)?
An OTE is the highest yearly salary an employee can make when their pay includes sales and commission. This means that most times, before commencing a job, as a sales or marketing professional, you may have to sign a contract specifying the conditions under which their OTE applies. OTE figures can vary based on factors like individual performance, sales targets, market conditions, and the company’s compensation structure. This is why it is essential to understand the terms and conditions outlined in the contract to ensure clarity on how the OTE is calculated and when it comes into effect.
How is an OTE calculated?
Normally, your OTE is the combination of your base salary with commission – i.e. a portion of the overall revenue you generate and occasionally includes bonuses but organizations can decide to come up with a method they think is right which is why there aren’t fixed methods explaining how to do it. Citing an example using the normal method, your base salary might be N70,000, but with an OTE reaching N120,000. This signifies that while your assured salary is N70,000, you have the potential to earn up to N120,000 if you achieve your sales goals.
What’s the Idea behind OTE?
The main idea behind OTE (On-Target Earnings) is to provide a clear understanding and incentive structure for employees in sales or related roles. It encourages and motivates them by setting achievable sales targets linked to their potential earnings, combining base salary, commission, and sometimes bonuses into a comprehensive earnings package. This way, employees can align their efforts with the company’s sales objectives, encouraging them to strive for higher performance to attain increased compensation.
What other roles can use OTE?
Apart from sales, OTE can apply to other roles which include;
- Marketing
- Business Development
- Retail
- Customer success and other finance roles.
Can I exceed my OTE?
OTE represents the maximum potential earnings an individual can achieve based on meeting or surpassing their sales or performance targets. However, exceptional performance, exceeding sales goals, or other outstanding achievements may lead to surpassing the initially estimated OTE. And, this your company may or may not recognize. If your employer is fascinated enough by how much you’ve done, they can include additional incentives.
