An All-inclusive Guide to How to Calculate Hours Worked

by Hamna Ayaz
How to Calculate Hours Worked

From keeping the track of business strategy and marketing goals to customer satisfaction and handling employee grievances, team leaders face numerous challenges in their daily tasks. And one of those tasks is the computation and maintenance of employees’ work hours. Being overly particular in this regard may lead to micromanagement. On contrary, overlooking the task completely can impact employee work efficiency and even may lead to issues like employee time theft.

Hence, work hour determination is a metric that ensures employees get paid accordingly to their hard work. Also, it helps to maintain detailed records in the event of an audit.

So, how to calculate the hours worked by employees?  Remoty is a Slack Time Tracking Solution that has created a simple, efficient way to tackle the task of processing your employees’ hours worked every week.

According to the United States Department of Labor, the definition of the workday and work, hours is as follows:

What is Work Day?

The period between time on any particular day when the employees commence their ‘principal activity and the time on that day at which they cease such principal activity or activities.

Therefore, the workday may be longer than the employee’s scheduled shift, hours, tour of duty, or production line time.

What are Work Hours?

The time an employee must be on duty, on the employer’s premises, or at any other prescribed place of work.

An employee’s time card is a legal document that can be used as a piece of evidence in legal proceedings. The record of time worked can be demanded and referenced by the federal departments to ensure compliance with local and federal labor laws. As it acts as a metric against which work can be measured, it is required to retain timecards and payroll-related calculations for at least two years during and after employment.

Try the demo of Remoty to see how work hours are calculated.

Importance of Work Hours

A century later to the industrial revolution, the need for the implementation of labor laws caught momentum. In the first half of the 20th century, employers were free to set normal 50, 60, even 70 or more hours every week as standard procedure. In 1940, the federal government of the USA passed the Fair Labor Standards Act (FLSA) to set limits on how many hours employees could work each week.

Advantages of Work Hour Calculation

A recent finding of a job searching site reflects the significance of job flexibility and work-life balance revealing that working hours are the most important factor for almost two-thirds (57%) of people when they decide to apply for a job.

Here are some other advantages:

  • It helps build discipline and hone computational abilities.
  • Knowledge of work hours’ calculation can help in effective usage of calculation soft wares too.
  • Better future decisions can be taken regarding employees.
  • This practice increases overall productivity and ensures better utilization of work hours.

Different Types of Work Hours

There are three basic types of work hour arrangements.

  • Full-time
  • Part-time
  • Overtime

Full-time Work Hours

Full time is the maximum time an employee can work in a certain period.

The FLSA has set an upper limit of 40 hours in which employees can work every week. Employers can set any suitable amount for full-time as long as it doesn’t exceed 40 hours per week. For example, a company could consider 30, 32, or 36 hours per week full-time or a four-day workweek for its employees.  Shorter workdays are an opportunity for employees to effectively balance work and life. The FLSA, however, did not define full-time work. It just sets a benchmark for hours worked per week. No hard and fast laws constitute full-time work. Because of this, employers can flexibly schedule work.

Companies with 50 employees offer benefits, like health insurance, to their employees if they work full time

With changing landscapes of businesses, productivity is being given preference over the actual number of hours worked.

See how Remoty provides flexibility to manage the workforce anytime, anywhere.

Part-time Work Hours

A part-time work arrangement is any work time below the full-time limit as defined by the employer. For Example, part-time arrangements can be freelancing contracts, zero-hour contracts, and more.

There is no definite law that establishes part-time hours. It depends on the company and the specific contract it has entered with the employee and what constitutes ‘part-time.’ Employees are only legally bound to serve specific contract hours in the organization.  There are no laws or regulations about how many hours per week is part-time. Usually upper limit of part-time hours is at half of the full-time hours or a little more. For example, a company could set part-time hours at 20, 25, 28, or more hours per week.

Some businesses (although they aren’t legally bound to) offer benefits to part-time employees as a goodwill gesture.

If the part-time hours begin to rise into the mid- or even high-30s, employees begin to question the difference is between the two designations. And if the full-time employees receive benefits like insurance, vacation days, and other perks, the part-time employees who are working 30, 34, or 37 hours per week may become agitated and resentful on receiving no rewards with almost the same amount of work.

Overtime

Overtime is the hours an employee works that exceed the full time or is beyond the stipulated hours. Employees are entitled to extra compensation here.

According to the Fair Labor Standards Act (FLSA) of the US Labor Law, the pay rate for overtime is 1.5 times the regular hourly rate. This standard is called time and a half.

Example;

  • If the hourly wage is $15, you will multiply this number by 1.5 to get the overtime rate:

$15 x 1.5=$22.5. If another employee makes $25 per hour, their overtime rate is $37.5 per hour ($25 x 1.5).

  • If an employee earns $15 per hour and works 45 hours a week, then the overtime amount to five hours. For calculation of pay of that week, you would calculate their pay at the standard rate for the first 40 hours, then time and a half for the overtime hours:

($15 x 40) + ($15 x1.5x 5) = $600 + $112.5= $712.5

  • For the employee who makes $15 per hour and works 40 hours per week, their gross pay is $600 ($15 x 40). If they work any number of minutes or hours above 40 hours, they must be compensated for that work at the overtime rate.

If an employee works 40 hours and 30 minutes (40.50 hours), their gross pay would be:

GROSS/TOTAL PAY= REGULAR PAY+OVERTIME PAY

Gross Pay = ($15 x 40) + ($15 x1.5 x 0.50)
Gross Pay = $600 + $11.25
Gross Pay = $611.25

MinutesDecimal Hours Minutes

Decimal

Hours

 Minutes

Decimal

Hours

50.08250.42450.75
100.17300.50500.83
150.25350.58550.92
200.33400.67601.0

 Minute to Decimal Value conversion Chart 

Courtesy: Pinterest 

The cost of paying overtime rates regularly quickly adds up and can have a significant impact on all aspects of business, including:

  • Labor budget
  • Overhead
  • Profit
  • Taxes

Companies are not required to pay overtime for salaried employees, and part-time hourly employees need to exceed 40 hours per week to earn overtime pay.

After clarifying what work hours, how part-time and full-time play a role, and the importance of efficient record keeping, let’s delve into the step-by-step process of calculating work hours for a hypothetical employee.

Learn About: 20 Apps to Keep Track of Employees’ Hours

How to Calculate Hours Worked

Calculating work hours can be a bit tricky.  For those who do not like math, we provided a free time card calculator and decimal hours to hours and minutes converter, these free tools will make calculating hours a piece of cake.

If you are looking to completely automate employee task tracking, check out Remoty

Calculating Hours Worked

Work hours can be calculated manually but the preferred method is using software like “Remoty”.  Performing manual math calculations can be timely and error-prone; while Remoty’s business time clock handles all the calculations effectively.

Tools for Tracking Employee Hours

Here are some acceptable ways to track time:

Pen and Paper Timecards

Writing down work hours is an ancient concept.  Evidence dated back to 6000BC shows civilizations recorded time. However, in today’s world, there are strict rules, regulations, and legalities. Documenting employee hours is considered an authentic and acceptable solution. Employees forward handwritten timecards to their employer once per week or every two weeks.

Spreadsheets

Google sheets, MS Excel, and many other options are available. These spreadsheets are one of the manual ways of employee time tracking. They are time-consuming and prone to error, and complicated to deal with messy formulas.

Calculation

You can design your own Excel template with complete customization. Just use different formulas to add work hours and calculate totals for specific periods like this:

Step 1

Suppose Marianne is a Remote employee of JM Corporation. During the week, she checks in at different times. For her, we can suppose our manual calculations this way:

  • In column D, add the ‘clock-in’ category in the heading
  • In column E, add the ‘clock-out’ category in the heading
  • Select the columns, Navigate the Format menu, and press the ‘Number’ format.
  • Enter hours worked in the heading of column F.

For this step, you may use AM/PM format or military time format as per your requirements.

Step 2

To calculate the hours worked:

  • In column F, subtract E4 from D4 and drag down.

Step 3

Now, to calculate pay for the employee:

  • In Column G, type the hourly rate.
  • In cell H4, multiply the G4 value with F4 to get the day’s total pay and drag down

Step 4

Finally: 

  • In cell F9, use =SUM (F4:F8) for the total hours.
  • In cell H9, use =SUM (H4:H8) for the total pay.

Mechanical Time Clocks

A conventional mechanical time clock is a device in which the employees place a paper timecard when they start and stop working. The machine stamps the date and time on the timecard. The employer can calculate worked hours with this information and pay the employee accordingly.

Free Time Clock Calculators

There is the availability of free online time card calculators on the internet.  These time clock calculators handle the necessary calculations required to determine hours worked.  They, often function a lot like a spreadsheet, allowing you to fill in the information and calculate the total hours for you.

The working principle of the electronic time clock is like a mechanical one but is paperless. The employee presents a badge in front of the device, and it stamps a digital timecard to record the date, start and end time. Some electronic time clocks can operate with a fingerprint or PIN instead of a badge.

 Learn about Remoty Task Manager!

  • Timecard calculator with lunch and overtime.
  • Excel time card calculator.
  • Convert hours & minutes to decimal hours.
  • Convert decimal hours to hours and minutes.

Time Clock Software

The best and most popular option for tracking employee hours is time clock software.  A decade ago, most of these kinds of software required computer installation but now there is no such need and they can be accessed from anywhere.  Time clock software provides many features which the traditional time clock cannot.  Here is a short list:

  • Quick and easy setup.
  • Automatic time clock calculations.
  • Employee attendance and time-off tracking.
  • Advanced Geo-Location and Job Costing features.
  • Send employee hours directly to payroll software.
  • Mobile and browsers apps for simplicity.

Employees can record their work time with clock software on computers or mobile devices. They log in to a website or application, then just click a button to clock in and out. Some software can be location-enabled to ensure employees clock in and out while at work. The software automatically calculates hours worked per pay period.

Calculation of Employee Hours

The most common way involves recording start time and end time for hours worked.  Some employers, require their employees to record their hours on paper, while others use a punch clock system to log hours.  Once work hours are recorded, the employer tallies up the totals for payroll. Some policies and procedures are taken as a standard to handle the calculation of work hours. Then by simple math employers can figure out each employee’s paycheck.

  • How your business will record work hours
  • What number format will be used?
  • What would be the rounding policy?
  • What to do if there are errors in the time record?

STEP 1: Choose a Method of Recording Work Hours

Physical timesheets, tools such as Remoty, or computer-based tracking systems in-built into the company’s intranet can be used.

STEP 2: Choose a Time Format

The two most common time formats are standard 12-hour format and military 24-hour format.

The standard time requires the addition of “a.m.” or “p.m.” to distinguish between morning and afternoon. Military time counts the morning hours just like the standard format but after 12:59 p.m., military time begins counting by adding an hour to twelve. P.m. and a.m. aren’t required in this format.

To convert time to military time, add 12 to the afternoon hours (the morning hours remain the same).

Example: 6:35 a.m. becomes 06:35 hours, and 6 p.m. becomes 18:00 hours.

STEP 3: Create a Rounding Policy

The US Department of Labor’s rounding policy sets fifteen minutes margin to decide whether or not an employee is on time. This is done because instances of employees coming in at the exact start time and exiting at the precise end time are extremely rare. The employee time from one to seven minutes is rounded down, while the time from eight to fourteen minutes is rounded up.

For instance, if office hours are 09:00 hours (9 a.m.) to 17:00 hours (5 p.m.), the chances of everyone clocking in at 09:00 and clocking out at 17:00 are extremely rare. On the other hand, individuals will be coming in at 09:10, 09:15, and even 09:25. In such cases, anyone who arrives at 09:15 or before would be marked ‘on-time,’ while anyone later than that would be marked ‘late’. The same rule applies to mark punching out.

Many organizations prefer a 24-hour format because it is easier while calculating work hours. The in-time, out-time, and the number of work breaks should be considered during calculation.

Determine the Start and the End Time

In the manual method like physical timesheet, the team members clock in and out each day of the pay period is calculated.

Example: An employee started working at 9:30 a.m. and finished at 5 p.m.

Transform the Minutes in Decimals

To convert the minutes in decimals, divide the minutes by 60

Example: 9:30 represents 9 hours and 30 minutes. Divide 30 by 60 to get 0.50. In this format, 9:30 becomes 9.5, and 17:00 becomes 17.

Subtract the Start Time from the End Time

To find the total hours, subtract the time the employee clocked in from when they clocked out.

Example: Total Hours =17 – 9.5 = 7.5

Subtract the Unpaid Time Taken for Breaks

Subtract time of the unpaid breaks.

Example: The employee took a one-hour lunch break.

7.5-1=6.5

The total hours worked for that day is 6.5.

Conversion of Hours to Decimal Value and Calculation of Gross Wage

To determine gross pay, simple multiplication of employee (time worked * wage) is done.

For example, if an employee works 8:15 minutes, this is 8.25 hours when converted to decimal, multiply it by their hourly wage; this results in a gross wage amount.

Sort and Create Work Hours Categories

In some industries, one employee can work in different departments in two different capacities, or in the restaurant business, employees can work different jobs at different pay rates.

For instance, Ivan works as a server for $12 per hour but sometimes fills in as a hostess for $15 per hour. In such scenarios, it’s essential to separate each block of time into different pay and calculate the hours separately for both jobs. The reason behind this is that both jobs may require different levels of commitment and even different levels of effort and time.

Prioritize sorting work into categories because it might cause legal issues.

Tabulate Data of Weekly Hours

Calculate and maintain separate records of each employee for their in-time and out-time of weekly hours. By adding up daily hours, it can be known that how many hours a week the employee has served and whether it is in sync with the company’s weekly hour mandates.

What if There are Errors in the Record of Time?

Sometimes employees may forget to clock in or out or there might be some other error on the record. In such a situation, it’s important to inform the employee that their time card is used to make the required changes.

For instance, let’s assume Ryan clocked in at 08:00 but forgot to clock out when he left.  The standard policy for business is to assume 17:00 unless otherwise indicated by management. The organization should let him know that his time card is used to mark the clock-out and have him initial it for verification.

SIMPLIFY IT WITH THE RIGHT TIME CALCULATING TOOL

If you are looking for a more advanced option of employee workhour calculation than traditional manual ways, then Remoty is at your service. You can make your team’s workflow more aligned by using the workhour calculation tool of Remoty software.

Remoty provides you a platform where you can closely monitor your team performance which, in turn, will assist you to formulate future strategies for better growth and development of your company. It really is the perfect solution for better coordination among group members and for building a more yielding, productive team by keeping everyone informed and engaged.

To learn more about the work hour calculating tool of our software, check out Remoty. 

 

Best Free Slack Daily Standup Bot

Free trial

Startups: free

Teams: $4

Capterra:  4.8

G2: –

Appsumo: 5

Log Time And Calculate Hours Worked Right Within Slack

Get started for free. No card required.

Other Tools:

Here are 4 other apps that can automate the calculation of employees’ hours for you.

Connecteam

Connecteam is an employee scheduling app. It has advanced GPS geofence capabilities; you simply have to set up worksites and link them with a job, a customer, or a project. Connecteam also forwards notifications reminders and summary reports. The reminders help your team to clock in/ out, along with daily limit alerts for employees who work overtime. The tool has integration capabilities and offers mobile apps for desktop and mobile users.

 

 

Free 14-day trial

Free – up to 50 users

Basic – $47 /month

Advanced – $95 /month

Expert – $191 /month

Enterprise – custom pricing

(Prices are fixed for the first 50 users)

Capterra

4.8 /5

Reviews: 113

G2

4/5

Reviews: 13

Calamari

Calamari is for employee vacation tracking. It’s an HRMS that administers everything related to your employees’ sick leaves, absences, late arrivals, paid time off, etc. Also, it manages team calendars, email notifications on daily/weekly absences,  automatic leave calculation, absence pool estimation, compliance with attendance policies, configuration for multi-country organizations, etc.

Slack Time Tracking Bot

Leave Management 2$ /employee /month

Clock-in/out $2.5 /employee /month

Capterra 4.7

G2 4.5

Toggl Track

TogglTrack has an intuitive vibrant interface. It is suitable for freelancers, small teams, and large teams alike. Toggl offers features like tags, reports, task tracking, team management, and a web time clock app. The desktop and mobile app allow you to track time automatically or add time entries manually.

Slack Time Tracking

Free $0

Starter $10

Premium $20

Enterprise custom

Capterra: 4.7

G2: 4.6

 

TimeDoctor

TimeDoctor specializes in enhancing employee accountability by URL tracking that allows admins to see what websites and applications their employees use. Also, it has a screenshots feature to monitor remote employees. It is suitable for Remote, Hybrid, and Outsourcing teams.

Slack Timesheet

Basic: $7

Standard: $10

Premium: $20

Capterra: 4.5

G2: 4.4

Additional Methods to Calculate Work Hours

Recording work hours should not come at the cost of employee privacy and comfort.

  • Design KPIs; Linking Performance with Work Hours

Develop key performance indicators for employees and use software to create electronic timesheets, then link them. This is one of the ways of measuring productivity, especially in remote employees.

  • Connect Productivity to Sales

By linking productivity with sales and gauging the hours worked the Human Resource department can identify the weak links and utilize the required tools and training to overcome them. It could be implemented as a separate technique especially in the sales department.

  • Track Media Platforms Usage

Although it’s not the best practice but monitoring and penalizing social media usage during work hours can actually improve employee performance.

  • Take Feedback from Peers

Taking feedback from co-workers and colleagues of the employee help understand them better. It could help eradicate any prejudice that may be hampering employee relationships within the organization.

18 Effective Job Time Tracking Application Software in 2022

Final Thoughts

To sum up, manual ways of employees’ work hour calculation might be cost-effective but are also time/effort consuming and prone to error. In organizations and while doing professional work, it’s better to use an automated work hour calculation software or tools like Remoty to maintain proper timesheet data from the very start. Remoty is a slack built-in solution that maintains complete attendance, absence, leaves, and vacation records. It lets you generate timesheets, and export and download payroll for accurate invoicing and billing of clients. So what’s the wait for? Try Remoty today!

Also, checkout our article on ClickUp time reporting!

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