What Is OTE and How to Set It for UK Sales Roles

OTE is one of those terms that appears on every sales job advert and gets misunderstood by almost everyone who reads it. Candidates treat it as a salary. Hiring managers treat it as a ceiling. Finance treats it as a cost line. And when none of those assumptions line up, the result is a compensation conversation that starts badly and gets worse from there.

If you're building or reviewing compensation for a UK sales team, getting OTE right isn't just a recruitment exercise. It shapes your budget, your culture, and whether your reps actually trust the plan they've been handed.

Here's how OTE works, what it should look like for different UK sales roles, and the mistakes that cost companies the most.

What OTE Actually Means

OTE stands for On Target Earnings. It's the total annual compensation a sales rep should expect to earn if they hit 100% of their quota. That total is made up of two components: base salary and variable pay (commission or bonus).

The key word is "target." OTE is not a guarantee. It's not a cap either. It's the midpoint — the earnings figure tied to delivering exactly the performance the business expects. A rep who exceeds target should earn more than OTE. A rep who misses should earn less.

This distinction matters because it defines the relationship between effort and reward. If OTE feels unreachable, it's not a motivator — it's a fiction printed on a job spec. If it's too easy to hit, there's no incentive to push past comfortable performance.

A well-set OTE answers a simple question for the rep: "If I do my job well, what will I earn?" And for the business: "What will this role cost me when it's working as intended?"

How OTE is Structured: The Base-Variable Split

Every OTE package divides into base salary and variable pay. The ratio between the two — the pay mix — determines how much of the rep's income is guaranteed versus performance-dependent.

The most common splits in UK sales teams are:

Split	Base	Variable	Typical Use
50/50	50%	50%	Aggressive growth roles, pure new business
60/40	60%	40%	Most common for Account Executives
70/30	70%	30%	SDRs, hybrid roles, account management
80/20	80%	20%	Customer success, renewal-heavy roles

A 60/40 split on a £70,000 OTE means £42,000 base salary and £28,000 variable at target. The rep earns £42,000 regardless of performance, and the remaining £28,000 is tied to hitting quota.

The split reflects the level of control the rep has over outcomes. Roles with a long sales cycle, high deal complexity, or significant team involvement tend to have a higher base proportion. Roles where the rep is the primary revenue driver — pure hunting roles, for instance — lean more heavily on variable.

Research from the Alexander Group's 2025 Sales Compensation Trends survey found that the median pay mix for B2B sales roles globally sits at 60/40, with UK companies tracking closely to that norm. Earlier-stage companies and those in competitive SaaS markets sometimes push closer to 50/50, though this can make recruitment harder if candidates view the base as too low relative to local cost of living.

UK OTE Benchmarks by Role

Setting OTE in the abstract is meaningless without market context. What "competitive" looks like varies sharply by role, seniority, industry, and geography within the UK.

Here are realistic OTE ranges for common UK sales roles as of early 2026, based on data from recruitment platforms, compensation benchmarking surveys, and published salary guides:

SDR / BDR (Sales Development Representative)

• OTE: £35,000 - £50,000
• Base salary: £25,000 - £35,000
• Typical split: 70/30
• Notes: London roles skew to the top of the range. Outside London, £40,000 OTE is competitive for a mid-level SDR. Entry-level SDRs may start at £30,000-£35,000 OTE.

Account Executive (Mid-Market)

• OTE: £55,000 - £85,000
• Base salary: £35,000 - £50,000
• Typical split: 60/40
• Notes: This is the broadest band because "mid-market" means different things to different businesses. A rep selling £20k ACV deals at a SaaS company sits at the lower end. A rep selling £80k-£150k deals with a longer cycle commands the upper range.

Account Executive (Enterprise)

• OTE: £90,000 - £150,000+
• Base salary: £60,000 - £90,000
• Typical split: 60/40 or 55/45
• Notes: Enterprise AEs in London working for well-funded SaaS companies can see OTEs well above £150,000. Outside technology, the range compresses. Financial services and professional services sales roles tend to sit at the lower end of enterprise OTE ranges but may offer additional benefits that offset the headline number.

Sales Manager / Team Lead

• OTE: £75,000 - £120,000
• Base salary: £55,000 - £80,000
• Typical split: 70/30 or 60/40
• Notes: The variable component for managers is usually tied to team performance rather than individual deals. Some plans layer in personal override commission on top of team targets, which can push effective OTE higher.

VP Sales / Head of Sales

• OTE: £120,000 - £200,000+
• Base salary: £90,000 - £140,000
• Typical split: 70/30
• Notes: At this level, compensation often includes equity, long-term incentive plans, or profit-sharing alongside commission. The cash OTE figure alone doesn't capture the full package.

These ranges are indicative. The best way to benchmark is to look at actual job postings for comparable roles in your sector and region, and to cross-reference with salary data from sources like the Annual Survey of Hours and Earnings (ONS) for broader context.

How OTE Relates to Quota

OTE and quota are two sides of the same coin. The relationship between them determines whether your compensation plan makes economic sense.

The standard rule of thumb is that a rep's OTE should be set at a ratio to their quota — commonly expressed as the "cost of sale" or "commission expense ratio." In most B2B sales organisations, the target is for OTE to represent somewhere between 15% and 25% of the rep's annual quota.

Here's how that works in practice:

If you set an AE's OTE at £80,000 and want a 20% cost-of-sale ratio, their annual quota should be £400,000. At 100% attainment, the business generates £400,000 in revenue (or bookings) and pays the rep £80,000 — meaning the rep costs 20% of the revenue they produce.

A quick formula:

Quota = OTE / Target cost-of-sale ratio

Or in reverse: if you know the quota, you can back into the OTE.

OTE = Quota x Target cost-of-sale ratio

This is where many plans go wrong. If you set OTE based purely on what it takes to recruit someone, without checking whether the resulting quota is achievable, you end up with a plan that's either too generous (eroding margins) or too aggressive (reps can't hit target, so they leave).

The relationship between OTE and quota should also account for ramp time. A new hire won't generate a full year's quota in their first year. If you're building a commission plan, model the ramp period separately — typically three to six months of reduced quota with guaranteed variable pay or a draw.

Setting OTE: A Step-by-Step Approach

1. Start with the market

Research what comparable roles pay in your sector and geography. Use job boards, recruiter conversations, and compensation surveys. You don't need to pay top of market, but you need to be in the range. If your OTE is 30% below market, you won't attract the talent to make the number work.

2. Define the pay mix

Decide the base-variable split based on the role's characteristics. Higher base for roles with less direct control over revenue. Higher variable for roles where the rep is the primary driver of outcomes.

3. Set the quota

Work backwards from your revenue plan. What does each rep need to produce for the business to hit its targets? Sense-check this against historical data — what are your current reps actually achieving? A quota that only the top 10% of reps can hit isn't a target; it's a fantasy.

4. Check the cost-of-sale ratio

Divide the OTE by the quota. If the ratio is above 25%, you're paying too much relative to output. If it's below 12%, the plan probably isn't competitive enough to retain good reps. Adjust either the OTE or the quota until the ratio lands in a sustainable range.

5. Model the upside

OTE is the 100% attainment figure. What happens at 120%? 150%? Your plan should have accelerators that reward overperformance, and the economics need to hold at those levels too. If a rep who does 150% of quota costs you more than the incremental revenue justifies, the plan breaks at scale. See our guide to building a sales commission plan for more detail on accelerators and plan mechanics.

6. Stress-test with employer costs

OTE is the gross cost to the rep. The actual cost to the business is higher once you add employer National Insurance contributions. At the current rate of 15% on earnings above £5,000, employer NIC adds a meaningful layer to every pound of commission paid.

For a rep on £80,000 OTE with a 60/40 split, the employer NIC on both base and commission comes to roughly £11,250 per year. The true cost of that role is closer to £91,250 — not £80,000. For a full breakdown of how this works, see our article on employer NIC and commission costs from April 2026.

Common OTE Mistakes

Advertising unrealistic OTEs

Posting "OTE £100,000" when your average rep earns £65,000 is not aspirational — it's misleading. Candidates who join expecting £100,000 and discover the OTE is only achievable by the top performer will leave within twelve months. Worse, they'll tell other candidates about it.

The test is simple: can at least 60-70% of your team realistically hit OTE? If the answer is no, either the quota is wrong or the OTE figure is inflated.

Ignoring the base salary floor

UK employment law doesn't set a minimum commission rate, but it does require that employees receive at least the National Minimum Wage (or National Living Wage for workers aged 21 and over, currently £12.21 per hour). For commission-only or heavily commission-weighted roles, you need to ensure the guaranteed base component meets this threshold, accounting for all contracted hours.

HMRC will look at actual hours worked, not just contracted hours, when assessing compliance. A base salary of £20,000 for a role that routinely requires 50-hour weeks may fall below the legal minimum on an hourly basis. This isn't hypothetical — HMRC actively investigates NMW compliance and has named employers who fall short.

Not distinguishing OTE from total compensation

OTE typically refers to cash compensation — base plus variable. But some companies bundle in pension contributions, car allowances, or other benefits when quoting an OTE figure. This creates confusion for candidates and makes benchmarking unreliable.

Keep OTE as the cash number. List benefits separately. Your job advert should make this distinction crystal clear.

Setting OTE once and never revisiting it

Markets move. If you set your OTE structure in 2023 and haven't reviewed it since, you're probably either overpaying relative to the market (unlikely) or underpaying (far more common). Annual reviews of OTE benchmarks should be a standard part of your compensation planning cycle.

Forgetting the tax impact on reps

Reps care about take-home pay, not gross figures. An OTE of £80,000 sounds different when the rep realises that commission pushed them into the higher rate tax band, and each additional pound of commission is taxed at 40% plus 2% employee NIC. Understanding how commission is taxed in the UK helps you set expectations and communicate the plan honestly.

OTE and Your Employer Budget

One of the most common blind spots in compensation planning is treating OTE as the cost of the role. It isn't. The employer cost includes:

• Base salary (guaranteed, paid monthly)
• Commission/variable pay (paid on achievement, variable by month)
• Employer NIC (15% on earnings above £5,000 — applies to both base and commission)
• Pension contributions (typically 3-5% employer contribution)
• Other benefits (health insurance, training, tools, etc.)

For a rep on £80,000 OTE, the fully loaded employer cost is typically £95,000-£100,000 depending on benefits. For a team of ten, that's a million-pound annual commitment before you account for management overhead, recruitment costs, or ramp periods.

Finance teams who model only the OTE figure will consistently underestimate the true cost of the sales team. This matters when setting headcount plans, forecasting margins, and making the case for additional hires.

Making OTE Work in Practice

A well-set OTE does three things. It attracts the right candidates by being competitive and honest. It motivates performance by creating a meaningful link between effort and earnings. And it protects the business by keeping compensation costs in line with revenue.

Getting there requires more than picking a number from a job board. It requires understanding your market, your economics, and your team's actual performance distribution — then building a plan that holds up at every attainment level.

The companies that do this well tend to be the ones where sales and finance collaborate on compensation design, rather than one side handing a number to the other. If you're building or reviewing your commission plan, start with OTE and work outward from there. Everything else — commission rates, accelerators, clawbacks, payment timing — flows from getting the OTE right in the first place.

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This article is for general guidance on setting OTE for UK sales roles. Compensation structures should be reviewed with legal and HR advisors to ensure compliance with UK employment law, National Minimum Wage requirements, and contractual obligations.