On-Target Earnings (OTE) is a key concept in provision and bonus models. OTE describes the total earnings an employee can expect if they reach their sales or performance goals. It includes both fixed salary and variable salary, e.g. commission or bonus.
The purpose of OTE is to provide a realistic picture of the salary potential. For the employee, it provides clarity on what is possible to earn, and for the company it acts as a tool to compare pay models across roles and markets.
Imagine an account executive with the following model:
If the quota is reached accurately, the commission will be:
3,600,000 × 0.10 = 360,000 kroner
Total OTE = 360,000 (fixed salary) + 360,000 (commission) = 720,000 kroner
In this example, fixed salary and variable pay are split 50/50, which is a common structure in sales organizations.
OTE creates transparency because it clarifies what an employee can expect to earn in normal performance. At the same time, it serves as a framework for designing incentive models that are both attractive to employees and financially sustainable for the company.
In short, OTE is not just a number on paper, but a key to balancing motivation, expectation reconciliation and budget control.