Market Benchmarking: On-Target Earnings (OTE) Plans

Why Market Benchmarking Matters for OTE Plans

Designing an effective On-Target Earnings (OTE) plan is essential for attracting and retaining top talent, especially in sales-driven organizations. Market benchmarking plays a crucial role in this process by providing insight into industry standards, competitive pay practices, and evolving compensation trends. Companies that leverage market data can create OTE plans that are both attractive and aligned with business goals.

In this article, we’ll explore how market benchmarking helps design competitive OTE plans, relevant data sources, and practical examples.

What Is OTE Market Benchmarking?

Market benchmarking involves comparing your company’s compensation structure with similar roles in the same industry, geographic region, and company size. This comparison helps establish competitive salary ranges, incentive targets, and bonus structures to ensure fair and motivating pay.

How Market Benchmarking Shapes OTE Plans

1. Setting Competitive Base Salaries

Market benchmarking ensures that base salaries in OTE plans align with industry norms. This fixed pay component must be competitive enough to attract and retain talent while considering the company’s financial constraints.

Example:
If the industry average base salary for a SaaS sales executive is $70,000, offering anything below that could deter top candidates. Benchmarking data from sources like Salary.com or Payscale helps establish a reasonable salary range.

2. Establishing Realistic Variable Pay Targets

Variable pay, such as commissions and bonuses, is central to OTE plans. Market data helps determine appropriate incentive percentages and payout thresholds based on job roles and sales targets.

Example:
If industry benchmarks show that a 10%-15% commission rate is standard for enterprise sales representatives, offering a similar rate ensures competitive earning potential. Sources like Comptryx, Radford Surveys, and Mercer provide this data.

3. Defining Total OTE for Similar Roles

Market benchmarking allows businesses to determine the total OTE by combining base salary and variable pay. This total compensation figure helps attract top talent while staying within budget.

Example:
A technology startup could use LinkedIn Salary Insights to check OTE averages for similar sales roles at competitor companies. If comparable OTEs range between $150,000 and $180,000, offering within this range keeps the company competitive.

4. Customizing OTE Plans by Region and Industry

Compensation benchmarks can vary by location and industry due to cost-of-living differences and demand for specific skills. Companies operating in multiple regions should tailor OTE plans based on local benchmarking data.

Example:
An IT services company might use Robert Half Salary Guides or Glassdoor to set different OTE levels for U.S. regions like Silicon Valley (higher pay) versus midwestern states (moderate pay).

Relevant OTE Market Benchmarking Sources

To create a data-driven OTE plan, use the following sources for industry-specific market benchmarking:

1. Salary.com: Industry-standard salary and pay ranges for various job roles.
2. Payscale: Compensation data with customized benchmarking reports.
3. Mercer: Global surveys covering executive pay, bonuses, and incentives.
4. Radford Surveys: Compensation data for the technology and life sciences sectors.
5. LinkedIn Salary Insights: Salary benchmarks based on LinkedIn members’ reported pay.
6. Robert Half Salary Guides: Comprehensive annual salary guides by region and industry.
7. Comptryx (Willis Towers Watson): Real-time salary and OTE comparisons across industries.

Best Practices for Using OTE Market Benchmarking Data

1. Define Comparable Roles: Ensure that job descriptions match industry benchmarks closely to avoid inaccurate comparisons.
2. Adjust for Company Size and Revenue: Consider how your company’s size affects compensation expectations.
3. Update Regularly: Compensation trends shift rapidly. Review and adjust OTE benchmarks annually.
4. Incorporate Internal Data: Use historical pay data from within the company to cross-reference market benchmarks.

Stay Competitive with OTE Market Benchmarking

Market benchmarking is a vital step in designing effective On-Target Earnings (OTE) plans. By leveraging data from reputable sources, businesses can create compensation structures that attract top talent, motivate employees, and align with company goals. A well-informed OTE plan ensures long-term business success while balancing financial sustainability.

Looking to design data-driven OTE plans? Bentega.io’s compensation management platform helps you integrate real-time market benchmarks into your incentive strategies, ensuring you stay competitive and aligned with industry standards.