Definition
The total expected compensation an employee will receive if they achieve all their performance targets, typically comprising a base salary plus variable pay elements such as commission, bonuses, or incentives.
UK Context
UK job advertisements that quote OTE figures must be realistic and achievable. The Advertising Standards Authority (ASA) has upheld complaints against employers who advertised OTE figures that very few employees actually achieved. Employers should be able to demonstrate with evidence that a reasonable proportion of employees in the role meet or exceed the stated OTE.
Best Practices
- Ensure OTE figures are realistic and that at least 60-70% of employees in the role achieve them
- Clearly break down OTE into base salary and variable components in job advertisements and offer letters
- Document the commission or bonus structure and targets in the employment contract
- Review OTE figures regularly against actual earnings data to ensure they remain accurate
- Be transparent about the ramp-up period for new starters to reach full OTE
Frequently Asked Questions
What does OTE mean in a job advert?
OTE stands for on-target earnings and represents the total annual compensation (base salary plus variable pay) that an employee can expect if they meet 100% of their performance targets. It is commonly used in sales, recruitment, and other commission-based roles.
Is OTE guaranteed?
No, OTE is not guaranteed. The base salary element is guaranteed, but the variable component depends on achieving targets. Employers should clearly explain the split between fixed and variable pay and the likelihood of achieving OTE based on historical performance.
How is OTE calculated?
OTE is calculated by adding the annual base salary to the expected variable pay at 100% target achievement. For example, a 35,000 pound base salary plus 15,000 pounds in target commission gives an OTE of 50,000 pounds.