Time is money. And if you aren’t properly tracking the hours employees work, time wreaks havoc on your bottom line. How do you make sure you’re doing it the right way, paying your employees the right wage, and protecting your net income from errors? Consider this your bite-sized guide to calculating hours worked.
2 Methods for Calculating Hours Worked
There are a couple of different methods for calculating hours worked. The first is manually calculating hours. The second is time clock software.
How to manually calculate employee hours
There are various methods for calculating employee hours worked. The most common involve recording start time and end times for hours worked. Some employers, require their employees record their hours on paper, while others use a punch clock system to log hours. Once work hours are recorded, the employer will need to tally up the totals for payroll.
Example of how to calculate total hours worked
To figure out how many hours employees work, you need a process to collect this information from workers before each pay period. From there, you can find the total for payroll.
Example of how to calculate total hours worked
First, you’ll need a start and end time. Let’s use a start time of 8:45 AM and an end time of 3:45 PM as an example.
- Convert all times to a 24-hour clock (military time):
- Convert 8:45 am to 08:45 hours
- Convert 3:45 pm to 15:45 hours
- Next, subtract the start time from the end time.
- You have the actual hours and minutes worked for the day.
It’s critical to ensure your math is accurate, as any human error can lead to massive costs. Bad data costs businesses $12.9 million per year according to a report from Gartner.
How to Calculate Employee Hours Using Software
You can use software to streamline the process of calculating hours worked. Make sure you enter all the right values for hourly rates and an overtime rate if you have one. Once you’ve done that, you can go on to calculating wages.
Using Hours Worked to Calculate Gross Wage
To determine the employee wage, you’ll need to convert hours and minutes into decimal format. After that, multiply the time worked by wage to find the gross pay.
For example, if an employee works 8:30 minutes, that’s 8.5 hours after decimal conversion. When you multiply that number by an employee's hourly wage, the result is the amount you’ll pay.
Below, you’ll find a chart to help you make minutes to decimal conversions.
Minute to Decimal Value Conversion Chart
Tools for tracking employee hours
The U.S. Department of Labor provides guidelines to help you track employee hours accurately. These are some acceptable ways to track time:
- Pen and paper time cards
- Mechanical time clocks
- Free time clock calculators
- Timeclock software
Let’s explore each one of these options in more detail.
Pen and Paper Time Cards
Pencil and paper might seem like an easy place to start, but it isn’t right for all businesses or workers. Time theft can be a major problem with the pencil and paper method since it’s difficult to ensure all the hours employees report are accurate.
This also can be a drain on productivity, since you or someone on your team will always need to review these time cards and add up the hours worked for every employee.
Mechanical Time Clocks
This device stamps the time and date onto a paper timecard. For this to work, the employer gives each employee a time card for the pay period. On-site employees then use the time clock to track their hours.
It’s the employee's responsibility to clock in and out at the right time. They punch the time card whenever they arrive or leave work. Then, the employee tallies up hours worked, and the employee receives pay.
Free Time Clock Calculators
You can find many free online time card calculators on the internet that will calculate hours worked for you. OnTheClock offers several free different time clock calculators:
Time Clock Software for Tracking Employee Hours
A more convenient option for tracking hours worked is time clock software. OnTheClock, you get several features your business can benefit from.
- Quick and easy setup
- Automatic time clock calculations
- Employee attendance and time-off tracking
- Advanced geolocation features
- Easy project tracking and job costing
- Send employee hours directly to payroll software
- Mobile and browser apps for simplicity
Demystify the Process of Calculating Hours Worked
Don’t leave records of hours tracked and wages paid up to chance. Learn more about what OnTheClock can do for your business and try it for free for 30 days. If you only have one or two employees for your business, you can use OnTheClock at no charge.