Total Target Compensation (TTC)

What is Total Target Compensation (TTC)?

Total Target Compensation (TTC), also known as On-Target Earnings (OTE) or target compensation, is the total annual compensation an employee can expect to receive when achieving 100% of their set goals. TTC includes both the fixed base salary and the variable pay at full target achievement.

For example: If a salesperson has a base salary of $80,000 annually and variable pay of $40,000 at 100% quota attainment, their TTC is $120,000 annually. This figure represents expected earnings - not a guarantee, but a realistic target based on achievable performance goals.

Why Does TTC Matter?

Total Target Compensation is a crucial concept in modern compensation strategies for several reasons:

Recruiting and Benchmarking

TTC enables companies to compare their compensation packages with the market in a meaningful way. When a candidate evaluates job offers, TTC is the most relevant comparison basis, as it shows the real earning potential rather than just the base salary.

Expectation Setting

By clearly communicating TTC from the start of the employment relationship, clear expectations are created between employer and employee. The employee knows exactly what is possible to earn and what is required to reach this level.

Budgeting

For the company, TTC is an important tool for budgeting labor costs. By knowing the expected TTC for each role, the finance department can better predict total compensation costs.

Components of Total Target Compensation

TTC typically consists of the following elements:

1. Base Salary

The fixed portion of compensation paid regardless of performance. Base salary provides the employee with financial stability and security.

• Paid monthly or bi-weekly
• Independent of sales results
• Typically adjusted annually based on performance reviews

2. Variable Compensation

The performance-dependent portion of compensation paid upon achieving specific goals. For salespeople, this typically consists of commission or bonus.

• Calculated based on sales results or other KPIs
• Typically paid monthly, quarterly, or annually
• Can vary significantly from period to period

3. Additional Compensation Elements (Optional)

Some companies include additional elements in TTC:

• Stock options or RSUs
• Signing bonus
• Annual bonus based on company performance
• Pension and benefits

Calculating TTC: Practical Examples

Let's look at concrete examples of TTC calculations for different roles:

Example 1: Account Executive

Compensation Structure:

• Base Salary: $6,667/month = $80,000 annually
• Variable Pay at Target: $3,333/month = $40,000 annually
• Pay Mix: 67/33
• TTC: $120,000 annually

Example 2: Sales Development Representative (SDR)

Compensation Structure:

• Base Salary: $4,167/month = $50,000 annually
• Variable Pay at Target: $1,250/month = $15,000 annually
• Pay Mix: 77/23
• TTC: $65,000 annually

Example 3: Sales Manager

Compensation Structure:

• Base Salary: $10,000/month = $120,000 annually
• Variable Pay at Target: $5,000/month = $60,000 annually
• Pay Mix: 67/33
• TTC: $180,000 annually

TTC vs. Actual Earnings

It's important to understand the difference between TTC and actual earnings:

Underperformance

If an employee only achieves 80% of their quota, actual earnings will be lower than TTC. With a base salary of $80,000 and variable pay of $40,000 at 100%, 80% performance would yield:

• Base Salary: $80,000
• Variable (80%): $32,000
• Actual Earnings: $112,000 (vs. TTC of $120,000)

Overperformance

With overperformance, actual earnings can significantly exceed TTC, especially if the compensation plan includes accelerators:

• Base Salary: $80,000
• Variable at 100%: $40,000
• Accelerator above 100%: 1.5x
• At 130% performance: $80,000 + $40,000 + ($12,000 × 1.5) = $138,000

Pay Mix and TTC

Pay mix describes the ratio between base salary and variable pay in TTC. Typical pay mix distributions:

• 80/20: Low-risk roles, SDRs, customer service
• 70/30: Balanced risk, account managers
• 60/40: Salespeople with moderate risk profile
• 50/50: Aggressive sales roles, high risk/high reward

The choice of pay mix affects both the employee's risk and motivation. A higher variable element creates stronger incentives but also greater income fluctuations.

Industry Benchmarks for TTC

TTC varies significantly by industry, geography, and role. Here are typical ranges for SaaS sales roles in the US market:

• SDR/BDR: $55,000 - $85,000 TTC
• Account Executive (SMB): $100,000 - $150,000 TTC
• Account Executive (Mid-Market): $150,000 - $220,000 TTC
• Account Executive (Enterprise): $200,000 - $350,000 TTC
• Sales Manager: $150,000 - $250,000 TTC
• VP of Sales: $250,000 - $400,000+ TTC

Best Practices for Communicating TTC

To ensure clarity and avoid misunderstandings, companies should:

1. Be Transparent in Job Postings

Include the TTC range in job listings so candidates can assess whether the role matches their expectations.

2. Explain the Calculation Basis

Clearly show how TTC is composed and what is required to achieve full variable pay.

3. Document in Employment Contract

Include a detailed description of TTC and the compensation plan in the employment contract or a separate addendum.

4. Provide Ongoing Visibility

Use software to give employees real-time insight into their performance and expected earnings relative to TTC.

Related Concepts

To fully understand TTC, it's helpful to know these related terms:

• On-Target Earnings (OTE): Synonym for TTC - total expected compensation at 100% target achievement
• Pay Mix: The ratio between fixed and variable pay
• At-Risk Pay: The portion of compensation only paid upon goal achievement
• Base Salary: The fixed portion of compensation
• Variable Compensation: The performance-dependent portion of compensation
• Accelerator: Increased commission rate for overperformance
• Quota: The sales target used to calculate variable pay

Automate Your TTC Tracking with Prowi

Keeping track of TTC and actual earnings for your entire sales team can be complex, especially when compensation plans include accelerators, decelerators, and various bonus elements.

Prowi is a commission calculation and management platform that gives both management and employees full visibility into:

• Current performance relative to targets
• Expected earnings based on current performance
• Historical earnings compared to TTC
• Forecasts for the rest of the period

Book a demo today and see how Prowi can give your team complete transparency around compensation.