Calculating hours worked ensures that employees are paid correctly for their time, including regular hours and any overtime. This helps avoid underpayment or overpayment, which can impact employee satisfaction and compliance with labor laws.
Computing hours worked also allows businesses to track labor costs accurately. It helps in budgeting, cost analysis, and resource allocation, enabling businesses to optimize their workforce and control expenses.
Take the following steps to calculate hours worked. These steps will aso help you on how to calculate the time cards or timesheet manually:
This step accurately notes when an employee begins and ends their work shift. It serves as the foundation for calculating total hours worked.
Converting to military time (24-hour format) is useful for consistency and clarity, particularly when dealing with international teams or systems that require this format.
Learn more about 12-24 time conversion.
Converting minutes to decimal format simplifies calculations and allows for easier aggregation and analysis of time data.
Note: To convert minutes to decimal, divide the minutes by 60 and add the result to the hours.
To calculate total hours, subtract the time the person clocked in from when they clocked out.
Breaks and lunches are typically unpaid and need to be subtracted from the total hours worked. Ensuring accurate deduction of break times helps calculate net hours worked.
Tip: With this information, you may determine gross wage by multiplying the hours worked by the hourly rate. Also, you can determine the annual salary with the weekly hours worked and hourly wage.
There are various options for keeping track of employee hours. Let's explore the following options:
Handwritten timecards involve employees manually recording their start and end times on physical cards or sheets of paper. They can note their breaks, lunch hours, and other relevant information.
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Popular spreadsheet tools, such as Microsoft Excel or Google Sheets, allow employees to input their hours worked and related information electronically.
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Related:
Electronic time clocks, also known as punch clocks, are physical tools that workers use to "clock in" and "clock out" by using a card, key fob, or biometric identification.
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Time clock software is a digital solution that allows employees to log their hours electronically using computers, mobile devices, or web-based applications.
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The choice of time tracking method depends on the organization's size, specific needs, budget, and desired level of automation and accuracy. Businesses should consider the number of employees, remote work requirements, reporting needs, and integration capabilities when selecting the most suitable option for tracking employee hours.
Overtime is the term used to describe the extra hours that an employee works beyond their regular work hours.
As per the Fair Labor Standards Act (FLSA), employers are required to pay a rate of 1.5 times the regular hourly rate for overtime work.
This means that if employees make $12 per hour and work overtime, they will earn $18 per hour for every hour worked over their regular hours.
For instance, if an employee works 45 hours a week, with the first 40 hours at the regular rate of $12 per hour, the remaining 5 hours will be paid at the overtime rate of $18 per hour.
Therefore, the employee's total pay for the week will be calculated as follows: ($12 x 40) + ($18 x 5) = $480 + $90 = $570.
Remember that businesses are not obligated to pay salaried employees overtime; part-time hourly employees must work more than 40 hours per week to obtain extra pay.
It is important to note that some states have their own overtime rules, which may differ from the FLSA guidelines. So, it is always advisable to check with your state's labor office to know the specific overtime regulations applicable to your work. We have some answers about the advantages and disadvantages of overtime.
To calculate hours worked in Excel, you can use formulas and functions to perform the necessary calculations. Here's a step-by-step guide:
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 A2 and the end time is in cell B2, the formula for calculating the hours worked on that day would be:
=B2 - A2
To handle overnight hours, i.e., from 7:25 PM to 5:00 AM, then use this formula =IF(A2>B2;B2+1;B2)-A2
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:
=(B2+1) - A2 - TIME(0,30,0)
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. For example, if the regular hours threshold is 40, and the total hours worked are in cell C2:
=IF(C2>40, C2-40, 0)
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.