What are the disadvantages of OTE?
On-Target Earnings (OTE)—a compensation structure combining a fixed base salary with variable commission incentives used heavily in sales roles—has notable disadvantages. A primary drawback is income volatility for employees; if market conditions shift, company product offerings lag, or territory assignments underperform, workers can experience steep drops in total take-home pay despite exerting heavy effort. For employers, rigid OTE targets can drive counterproductive sales behaviors, such as aggressive discounting or short-term deal stuffing to hit quarterly quotas, which can damage long-term customer relationships and distort accurate corporate revenue forecasting.
Related FAQs
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