Calculating hours worked in Excel enhances accuracy, efficiency, scalability, flexibility, and analysis capabilities. It is a reliable and accessible tool for managing and tracking employee hours, and supporting the payroll processes.
To ensure that work hours are tracked accurately, you will need to follow a set of steps, and some formulas. We will provide all the details you need to master how to calculate hours worked accurately.
Calculating hours worked in Excel offers several benefits and advantages:
To calculate hours worked in Excel, you can use formulas and functions to perform the necessary calculations. Here's a step-by-step guide.
You can download the Excel file to review how we implemented the following steps.
In a column, enter the start time in one cell and the end time in another cell. Ensure that the time values are entered in a recognizable format, such as "9:00 AM" or "17:30" (if using military time).
In a new cell, subtract the start and end times to calculate the time difference. Use the following formula:
=end time cell - start time cell
For example, if the start time is in cell B2 and the end time is in cell C2, the formula for calculating the hours worked on that day would be:
=C2 - B2
To handle overnight hours, i.e., from 7:25 PM to 5:00 AM, then use this formula =IF(B2>C2;C2+1;C2)-B2
Format the cell containing the calculated difference in a time format. Right-click on the cell, select "Format Cells," choose the appropriate time format (e.g., "hh:mm" for hours and minutes), and click "OK."
Once you have added the time entries for each day and calculated the total daily hours worked, you need to add the total hours to know the weekly total. In our example, we used =SUM(D2:D6), Where D2 to D6 was the total hours worked daily from Monday to Friday.
You will get the correct answer if the total hours are less than 20. However, your sum will probably have > 30 hours, and it is necessary to format the cell as Custom [h]:mm to get the correct answer.
Optional steps:
If you want to deduct break times from the total hours worked to calculate regular hours, use the subtraction formula. For example, if the break time is 30 minutes, subtract it from the total hours worked:
=D2-TIME(0;30;0)
Since breaks/lunches are unpaid they must be subtracted from the hours worked. Ensuring accurate break time deduction helps calculate net hours worked.
In our example we have added two more columns: Breaks and Total hours. In this way, the formula for total hours will be =D2-E2, where D2 represents the difference between the end and start times, and E2 is represented by the break time. By deduct the break time from the total time, we get the total net hours.
To calculate overtime hours, you can use an IF statement to check if the total hours worked exceed the regular hours threshold. If it does, subtract the regular hours from the total hours to get the overtime hours.
Weekly overtime
To calculate overtime hours beyond the 40 regular weekly hours, use this formula.
=IF(F9>TIME(40;0;0); F9-TIME(40;0;0); 0)
Where F9, represents the employee total number of worked hours weekly.
Daily overtime
You can also use a different formula to calculate overtime above the regular daily hours (usually set to 8h). The formula used to calculate daily overtime is
=F3-TIME(8;0;0)
Where F3, represents the employee total number of worked hours daily, and TIME(8;0;0) defines a period of 8 hours in time.
You now have all the informations, needed to calculate your gross pay.
Tip: We expand on how to calculate time in Excel, the formula used and general use-cases.
Tip: Adjust the cell references and formulas according to your specific data layout and requirements. Excel provides various functions and operators to manipulate time values, such as SUM, HOUR, MINUTE, TIME, and IF, which can be utilized based on your specific calculations and needs.