Time is money. And if you aren’t properly tracking the hours employees work, time can wreak 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.
The Big Picture
To determine an employee's wage, you’ll need to convert hours and minutes into decimal format. After that, multiply the hours worked by the hourly wage to determine the gross pay.
For example, if an employee works eight hours and 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.
Here, you’ll find a chart to help you make minutes to decimal conversions.
Note that in order to calculate net pay, you’ll need more information than what this article is able to provide. Specifically, you’ll need to know how to calculate deductions for taxes and withholdings. You’ll also need to know how to calculate overtime and holiday pay to meet both state regulations and your organization’s policies.
The U.S. Department of Labor provides guidelines to help you track employee hours accurately. These are some acceptable ways to track time:
Let’s explore each one of these options in more detail.
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.
This device stamps the time and date onto a paper time card. For this to work, an 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 an employee's responsibility to clock in and out at the right time. Each employee punches a time card whenever he or she arrives or leaves work. Then, the employee's hours worked are tallied and he or she is paid accordingly.
You can find many free online time card calculators on the internet that will calculate hours worked for you. OnTheClock offers several free time clock calculators:
A more convenient option for tracking hours worked is time clock software. With OnTheClock, you get several features your business can benefit from.
That said? We know OnTheClock may not be the right choice for all business owners. We’ll explain more in-depth about time clock software options later, but first, let’s discuss how to manually calculate hours worked.
If you’re processing payroll for the first time ever, you may be wondering how to add up hours worked by hand. Here’s the step-by-step method for how to manually calculate hours worked.
The first step for calculating hours worked is to note the exact time work was started and finished. If you’re processing payroll for employees, this information should be provided to you on a time card. If you’re processing this information for yourself, as an independent contractor, note the start and end times of your workdays.
If you are using a 12-hour clock format, convert the start and end time to the 24-hour format (or military time). For example, if you started work at 9:30 a.m., it would be 09:30 in military time. If you finished work at 5:45 p.m., it would be 17:45 in military time. Our military time calculator can do this for you instantly.
To determine the length of each day worked, subtract the start time from the end time. For example, if you started work at 09:30 and finished at 17:45, the time difference would be eight hours and 15 minutes.
If you had any unpaid breaks during your work period, subtract the duration of those breaks from the total time calculated in the previous step. For example, if you took a 30-minute, unpaid break, subtract 30 minutes from the eight hours and 15 minutes calculated earlier.
Convert the remaining time into decimal format for easier calculations. Our decimal hour calculator can do this for you, or you can refer to our conversion chart above. If you’re a math wiz, you can convert it yourself by simply dividing the number of minutes by 60.
If you need to calculate the total hours worked for a specific pay period, you’ll repeat these steps for each day worked. Then, you can simply add up all the hours you calculated for the entire pay period.
Calculating hours worked is simple arithmetic. That said, if you need to calculate work hours on a regular basis, the process can become quite tedious. If you’re processing payroll for a staff of any size, manually adding hours worked quickly becomes time-consuming.
If you’d like to streamline this process, modern technology can help.
Whether you’re an independent contractor creating an invoice or responsible for the payroll of an entire company, using software to keep track of hours worked is a great convenience. There are two main ways to do this: You can use spreadsheet software (like Google Sheets or Microsoft Excel), or you can use an online time clock.
One of the most common ways to track hours worked is with spreadsheets. Keep in mind that you’ll need to create multiple spreadsheets to reflect each worker and pay period. If you’re an independent contractor, you’ll create a spreadsheet for each client and pay period.
First, you’ll need to create a new workbook — we like Microsoft Excel, but these instructions should also work for Google Sheets. To set up your workbook:
If you’re a freelancer, we recommend you record your working times throughout the pay period. If you’re processing payroll for employees, you’ll need to obtain this data from your workers. Either way, here’s how to fill out the spreadsheet:
In the "Total Hours" column, use a formula to calculate the hours worked for each day. Subtract the start time from the end time to get the duration of work. If you’ve formatted your spreadsheet per our instructions, you can simply enter the formula =C2-B2 into cell D2. That’s because cell B2 is your start time, cell C2 is your end time, and cell D2 is the total hours worked.
Now, we need to change how the hours worked are formatted.
Next, we’ll use another formula to tally the total work hours for the pay period. Below the last row of the "Total Hours" column, use the SUM function to calculate the total hours worked for the pay period.
For example, if the "Total Hours" column ends at row 20, the formula for the total hours worked would be: =SUM(D2:D20).
Remember to save your file periodically to ensure your data is safely stored. It’s best to name your files in a way that helps you keep them easily organized (such as by date). Additionally, you can create different sheets or tabs within the workbook to track hours for different periods, projects, or workers.
That’s it! If desired, you can customize your Excel sheet by adding additional columns for notes, overtime hours, or any other relevant information. You can also use Excel's built-in functions and features to analyze your data further, such as calculating average hours, identifying days with the most hours worked, or creating charts to visualize your work hours.
One thing to keep in mind is, if you have non-exempt workers, you’ll need to keep track of their overtime hours. The Fair Labor Standards Act mandates overtime is paid at a time-and-a-half rate for any hours worked in excess of 40 in a single workweek.
However, your state regulations may differ. For example, some states mandate that time and a half is paid after eight hours are worked in a single day. Other states mandate double pay as the rate of pay for overtime.
Additionally, your organization may have stricter overtime policies than what’s mandated at the federal level. Likewise, if your employees work an alternative work schedule, then overtime may need to be calculated completely differently. That’s because alternative work schedules are often compressed, allowing for shifts that exceed more than eight hours with fewer workdays.
That said, we can provide some general insight into how to track overtime hours — just be sure to stay compliant with federal and state labor laws as well as your employer’s policies.
Here is a step-by-step guide on how to manually calculate overtime.
First thing’s first, like we said above, it’s important to understand the overtime rules and regulations specific to your jurisdiction or company policy. You’ll need this information to determine the number of hours worked that exceeds the overtime threshold. For example, it could be any hours worked beyond 40 hours in a workweek.
Next, you’ll want to add up the total hours worked during the designated period (i.e., a workweek). To do so, you can follow the steps we laid out earlier in this article. Exclude any break or meal periods that are not counted as working hours.
Now that you’ve tallied up the hours worked, you’ll need to compare the total hours worked with the overtime threshold. If the total hours worked exceed the overtime threshold, overtime is applicable.
To figure out the number of overtime hours, simply subtract the overtime threshold (i.e., 40 hours) from the total hours worked.
Double-check your employer’s overtime policy and/or your local labor laws to determine the overtime rate. Typically, overtime is paid at a rate of time and a half. However, other pay rates, such as double pay, are also common.
Now that you have all the information, you can calculate overtime pay by multiplying the number of overtime hours by the overtime pay rate. For example, say you’re calculating overtime at a rate of time and a half for someone who worked 44 hours in a workweek. You’d multiply four hours by their rate of pay, then multiply it by 1.5.
Now that we’ve calculated overtime pay, we can add the employee's regular pay for the regular hours worked to the overtime pay for the overtime hours worked. This total represents the employee's total earnings for the designated period.
Remember, overtime calculation methods may vary based on specific labor laws and company policies. Always ensure you are familiar with the regulations applicable to your jurisdiction and consult any relevant policies or agreements.
Calculating employee hours with OnTheClock is very simple. That’s because we automatically calculate hours worked for you. All you have to do is view them. Here’s how:
Step 1:That’s it!
If manually calculating hours worked is slowing you down, a time clock is a solid solution. Time clock software can make your life even easier by streamlining your entire payroll process. Here are some of the benefits of taking your time tracking system online.
To sum up, time clock software offers numerous advantages, making it a valuable tool for businesses of all sizes to effectively manage and track employee hours.
We might be biased, but we think OnTheClock is the best option for time tracking, especially if you’re a freelancer or small business. That’s because we’re designed to be an affordable solution loaded with everything you need to track hours worked, stay compliant, and manage employee schedules.
That said? Our software may not be for everyone, so here are a few other options to consider:
These are just a few of the online time clocks available. Take your time choosing the one that makes the most sense for your business (and budget) and use it to maintain your records and streamline your operations.
Like we said earlier, it’s important to choose a time tracking method that makes the most sense for your business needs. The following should be top of mind when deciding which tracking method works best for you.
Look for a time tracking method that offers accurate and reliable tracking capabilities. Consider the precision of the system, its ability to capture different types of work hours (regular hours, overtime, breaks), and its reliability in accurately recording and storing data.
Consider the usability and user-friendliness of the time tracking method you select. It should be intuitive and easy for both you, as the business owner, and your employees to use. Look for features such as simple clock-in and clock-out functions, clear interfaces, and ease of generating reports.
Consider the scalability of the time tracking method to accommodate your business's growth. If you plan to expand and hire more employees in the future, ensure the method can handle increased users and workloads without compromising efficiency or incurring additional costs.
Evaluate whether the time tracking method you select integrates well with your existing business systems or tools. Consider compatibility with your payroll software, project management platforms, or other tools you rely on. Seamless integration can streamline processes and data transfer, saving you time and effort.
Assess the cost and affordability of each potential time tracking method. Look at the pricing structure — whether it's a one-time purchase, subscription-based, or offers a free version — and consider the long-term cost implications for your business. Also, take into account any additional fees, such as those tied to support, upgrades, or integrations.
Remember to align these factors with your business's specific needs and requirements to ensure the chosen time tracking method fits your company's workflow and time management needs.
With OnTheClock, workers simply clock in and out. At the end of each pay period, we automatically count the hours worked for you. From there, everyone can review their time cards before sending them to your payroll provider.
If you’re an independent contractor or small business owner with less than three employees, OnTheClock is free to use. If you’re running a growing business, our software is one of the most affordable options available, complete with pricing plans designed to scale with you.
The best part? Your first 30 days of OnTheClock are free. Start your free trial now and see why we’re trusted by more than 15,000 businesses and 125,000 employees.
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