How To Calculate Hours Worked?

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:

Step 1: Record Start and End Times

This step accurately notes when an employee begins and ends their work shift. It serves as the foundation for calculating total hours worked.

  • Example 1: An employee starts their shift at 9:00 AM and ends at 5:30 PM.
  • Example 2: A worker begins their shift at 7:23 AM and finishes at 4:05 PM.
  • Example 3: A team member starts work at 1:00 PM and ends at 9:45 PM.

Step 2: Convert to Military Time (24-hour format)

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.

  • Example 1: 9:00 AM becomes 9:00 hours, and 5:30 PM becomes 17:30 hours.
  • Example 2: 7:23 AM becomes 7:23 hours, and 4:05 PM becomes 16:05 hours.
  • Example 3: 1:00 AM becomes 13:00 hours, and 9:45 PM becomes 21:45 hours.

Learn more about 12-24 time conversion.

Step 3: Convert Minutes to Decimal Format

Converting minutes to decimal format simplifies calculations and allows for easier aggregation and analysis of time data.

  • Example 1: 9:00 becomes 9, and 17:30 becomes 17 hours and 30 minutes. Divide 30 by 60, and you get 0.5 hours. In decimal format, 17:30 becomes 17.5.
  • Example 2: 7:23 AM becomes 7 hours and 23 minutes. 23/60 becomes 0.38 hours. In decimal format 7.38. 16:05 becomes 16 hours and 5 minutes. 5/60= 0.08 In decimal format 16.08.
  • Example 3: 13:00 hours become 13. 21:45 hours become 21 hours and 45 minutes. 45/60 = 0.75. In decimal format 21.75.

Note: To convert minutes to decimal, divide the minutes by 60 and add the result to the hours.

Step 4. Subtract the Start Time From the End Time

To calculate total hours, subtract the time the person clocked in from when they clocked out.

  • Example 1: 17.5 – 9 = 8.5
  • Example 2: 16.08 – 7.38=8.7
  • Example 3 21.75-13=8.75

Step 5: Subtract Unpaid Breaks and Lunches

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.

  • Example 1: The employee takes a 30-minute lunch break at 12:30 PM.
  • Example 2: The worker has two 15-minute breaks, one in the morning and one in the afternoon.
    15 min x 2 = 30 min. In decimal format 30/60 = 0.5
  • Example 3: The team member takes a 1-hour lunch break at 3:00 PM.

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.

What are the options for tracking time?

There are various options for keeping track of employee hours. Let's explore the following options:

Handwritten Timecards:

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.


  • Low cost and simplicity.
  • Suitable for small businesses with a maximum of ten employees.
  • Easy to customize based on specific tracking needs.


  • Prone to errors, inaccuracies, or illegible handwriting.
  • Time-consuming when it comes to calculating and aggregating data.
  • Difficult to enforce consistent timekeeping standards.


Popular spreadsheet tools, such as Microsoft Excel or Google Sheets, allow employees to input their hours worked and related information electronically.


  • Flexibility to customize and create formulas for calculations.
  • Simple to share and collaborate with multiple coworkers.
  • Can provide basic reporting and analysis capabilities.


  • Relies on employees' accuracy and diligence in entering data.
  • Limited automation and potential for manual errors.
  • Difficult to scale and manage as the number of employees increases.


Electronic Time Clocks:

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.


  • Automated tracking of employee hours, reducing the risk of errors and inaccuracies.
  • Easy to use and ensures consistent timekeeping standards.
  • Can provide real-time data and alerts for attendance issues.


  • Requires an initial investment in purchasing and maintaining the time clock hardware.
  • Limited flexibility for remote work or mobile employees.
  • May lack advanced reporting and integration capabilities.

Time Clock Software:

Time clock software is a digital solution that allows employees to log their hours electronically using computers, mobile devices, or web-based applications.


  • Convenient access for remote workers and mobile employees.
  • Offers advanced features like automated calculations, overtime tracking, and PTO management.
  • Can integrate with payroll systems, providing seamless data transfer.


  • Cost associated with software licensing or subscription fees.
  • Initial setup and training are required for employees and administrators.
  • Dependence on reliable internet connectivity for remote access.

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.

What is overtime pay?

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.

How to Calculate Hours Worked in Excel?

To calculate hours worked in Excel, you can use formulas and functions to perform the necessary calculations. Here's a step-by-step guide:

Step 1: Enter the Start Time and End Time

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).

Step 2: Calculate the Difference in Hours

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 

Step 3: Format the Cell as Time

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."

Step 4: Calculate the total hours worked weekly

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:

Calculate Total Regular Hours Worked

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)

Calculate Overtime Hours (if applicable)

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.