How to Calculate Hours Worked: Methods and Examples

Whether you're managing a small team or a large workforce, understanding how to properly track and count hours worked helps you to meet legal requirements and keep accurate records. 

Here, we’ll walk you through the step-by-step process of how to count hours worked for your employees. This helpful guide covers everything you need to know, from choosing how to record time to doing the maths.

Step-by-step instructions to calculate hours worked

To help you work out hours worked by your staff, we've put together step-by-step instructions. Here’s a quick overview:

• Step 1: Choose a method for recording time
• Step 2: Set a start and end time
• Step 3: Convert time to 24-hour time
• Step 4: Convert minutes to decimals
• Step 5. Subtract the start time from the end time
• Step 6: Subtract unpaid time for breaks
• Step 7: Complete a table of weekly hours

Note that these steps might change a bit depending on what your business needs.

Here’s the first step of how to calculate time worked:

Step 1: Choose a method for recording time

To stay on the right side of the Fair Work Act, you need to keep good records of employee hours worked. The good news is the Fair Work Act doesn't dictate how you track hours, as long as the times you record match what people actually worked.

Example

The best way to track hours depends on things like how big your business is, how many people work for you, and your budget. Here are some key methods to count hours worked:

• Mechanical time clock: Employees place a paper time card into a machine that automatically stamps the date and time of their shift.
• Electronic time clock: Similar to mechanical clocks but digitally managed. Employees scan a badge, input a PIN or scan their fingerprint to clock in and out.
• Time clock software: With time tracking software, employees can clock in and out from virtually any device via an online application or website portal. For an easy-to-use option, QuickBooks Time Clock Kiosk streamlines employee time tracking.
• Time-tracking apps: QuickBooks mobile timesheet app provides comprehensive time-tracking functionality from clock in and clock out to rostering and approving hours worked on the go.
• Semi-automated timesheets: Timesheet calculators help automate the calculation of hours worked by simply entering data such as start time, end time, and unpaid breaks. Try our free timesheet calculator.

Step 2: Set a start and end time

When you're tracking hours worked, it's good to set clear start and end times for regular shifts. That way everyone knows when they should clock in and out each day. Say an employee’s shift starts at 8:00 AM and ends at 5:00 PM. These are the hours they’ve been ‘on the clock’. For salaried roles, this might be more consistent, while hourly employees may vary day to day.

Example

Sarah clocks in at her start time of 8:30 AM and clocks out at 5:30 PM. We'll stick with these times through our examples so you can see how it all works together.

Step 3: Convert time to 24-hour time

Using 24-hour time removes any confusion about AM and PM. To change 12-hour time to 24-hour time, just add 12 hours to any time between 1:00 PM and 11:59 PM. Use the chart below if you need a quick reference.

Example

Here are examples of converting 12-hour time to 24-hour time:

• 2:35 PM becomes 14:35
• 5:15 PM becomes 17:15
• 8:10 PM becomes 20:10
• 11:40 PM becomes 23:40

For our ongoing example, 8:30 AM remains 8:30 (or 08:30), while 5:30 PM becomes 17:30.

Step 4: Convert minutes to decimals

To count hours worked, most payroll systems use decimals rather than minutes. Turn minutes into decimals by dividing the minutes by 60 (since there are 60 minutes in an hour). Here's the formula:

Minutes worked ÷ 60 = Decimal value

Example

To turn 8 hours and 30 minutes (8:30) into a decimal, you divide 30 by 60. So 30 minutes becomes 0.50 (half an hour).

30 ÷ 60 = 0.50

The total time becomes 8.50 hours for the start time, and 17.50 hours for the end time (5:30 PM).

Use this chart for common minute-to-decimal conversions:

Note: Turning minutes into decimals isn't the same as rounding hours. People need to be paid for all the time they work. The Fair Work Ombudsman says you shouldn't 'round' employee hours if it means they get paid less.

Step 5: Subtract the start time from the end time

Once you've got minutes as decimals, it's much easier to subtract start and end times to work out hours worked.

Example

Using our ongoing example, the employee clocked in at 8:30 AM (8.50 in decimal format) and clocked out at 5:30 PM (17.50 in decimal format).

Subtract the start time from the end time:

17.50 - 8.50 = 9.00 hours

Step 6: Subtract unpaid time for breaks

Don't forget to take out unpaid breaks when you're working out total hours. This makes sure you only pay people for time they're actually working. Unpaid breaks are typically any time where employees aren’t actively carrying out job duties, such as rest breaks and meal breaks.

Example

Using our example, subtract the appropriate lunch break from the total calculated hours. If the break is 30 minutes (0.5 hours), the calculation becomes:

9.00 - 0.50 = 8.50 hours worked

If the break is 1 hour, the calculation would be:

9.00 - 1.00 = 8.00 hours worked

Step 7: Complete a table of weekly hours

Once you've worked out the daily hours for each person, make a weekly summary table to see the total weekly hours. You’ll be able to see how much an employee has worked each week and quickly check if it aligns with company policies about unpaid breaks and overtime. This also makes calculating employee payroll much easier.

Example

Here's a sample weekly timesheet for our example employee, Sarah:

How to calculate the average hours worked per week

Working out average weekly hours helps you understand patterns and plan for staffing. To get average hours per week, add up total hours over a period and divide by the number of weeks.

Here’s how to figure out hours worked on average per week:

Total hours worked ÷ Number of weeks = Average hours per week

This is really handy for part-time or casual staff whose hours change week to week. It helps you keep payroll records and stay compliant with employment agreements. Check out this guide for more information on calculating weekly average hours.

Example

Here’s how to work out hours worked for our example employee, Sarah, on average per week. If she worked 160 hours over 4 weeks:

160 ÷ 4 = 40 hours per week average

Try our free timesheet calculator tool

If you want an easy way to work out hours worked per week without doing all the maths yourself, check out our free timesheet calculator.

It's simple to use—just input clock-in time, clock-out time, unpaid breaks, pay rates, and overtime rates. Then you can download a CSV file of the table to keep for your records.

What are hours worked?

According to the Fair Work Act, “hours of work” refers to any time during which an employee performs their job requirements. This includes:

• Being on-site
• Working from home
• Attending mandatory meetings

Employers must pay non-exempt employees at least the federal minimum wage for all hours worked, excluding unpaid rest breaks and meal breaks.

Typically, an employee can work a maximum of 38 hours per week unless an employer asks them to work reasonable extra hours. In some cases, employees may work more than 38 hours per week based on agreed hours in an enterprise agreement, other registered agreement or employment contract.

How many hours employees work depends on whether they're employed on a full-time, part-time or casual basis, or if they're required to work past their scheduled shift for overtime. Here’s how hours tend to differ, depending on types of employment:

Full-Time Work

Since the Fair Work Act requires employers to pay employees overtime wages for working more than 38 hours, many people consider 38 hours per week as full-time work.

Part-time work

Part-time employees typically work fewer hours than full-time employees, ranging anywhere from 17 to 34 hours per week, depending on the employer and what the role requires.

Overtime work

Non-exempt employees who work more than 38 hours in a working week must be paid one and a half times their regular rate of pay. If your employee earns $20.00 per hour and works 39 hours, you'd pay them $30.00 for that extra hour.

Benefits of accurate time tracking

Getting time tracking right has lots of benefits for both you and your staff:

• Fair pay: Accurate time-tracking makes sure that everyone gets paid correctly and cuts down on disputes. When hours are tracked properly, there's no guesswork about what people should be paid. This means happier employees who trust they're getting what they've earned.
• Keeps you compliant: The Fair Work Act has strict requirements about keeping time records, and getting it wrong can lead to hefty fines. Good time tracking systems help you stay on the right side of the law.
• Controls costs: You can see exactly where your money's going and spot patterns like overtime spikes or inefficient scheduling. This data helps you make smarter decisions about staffing and keep labour costs under control.
• Shows productivity: You might discover that certain times of day are more productive, or that some tasks take longer than expected. This insight helps you plan better and make changes that boost performance.
• Accurate records: You're legally required to keep time records for 7 years, and they need to be accurate and accessible. Good tracking systems make this easy and give you peace of mind during inspections or audits.
• Easier payroll: Instead of spending hours calculating hours and overtime by hand, you can process payroll quickly and confidently. This frees up time for more important business tasks and reduces the chance of calculation errors.

Common time calculation mistakes

Watch out for these common errors when working out employee hours:

• Not converting minutes to decimals: Always turn minutes into decimal format before doing calculations
• Getting 24-hour time wrong: Double-check PM times by adding 12 hours properly
• Forgetting unpaid breaks: Always take out meal breaks and other unpaid time
• Rounding hours wrong: Only round if it doesn't mean people get paid less
• Maths mistakes: Think about using automated tools to cut down on errors
• Getting overtime wrong: Make sure overtime rates are right for hours over 38 per week
• Poor records: Keep detailed, readable records for all of your calculations

Pros and cons for manual vs automated time tracking

So, how do you calculate hours worked in an easy and accurate way? Choosing the right time tracking method for your business depends on your needs, budget, and how tech-savvy your team is. Each approach has its upsides and downsides, so it's worth understanding what you're getting into before you decide:

For time tracking solutions, check out QuickBooks Time to see how digital tools can make your processes easier.

What are the record-keeping obligations in Australia?

Under Australian employment law, employers have specific obligations when it comes to keeping records. The Fair Work Act says employee time records must:

• Be easy for a Fair Work Inspector to access
• Be readable and in English (preferably plain, simple English)
• Be kept for 7 years from when they were created
• Not be changed unless you're fixing an error
• Not be false or misleading

These rules make sure everything's transparent and fair for both employers and employees. Good record keeping also helps sort out any disputes about hours worked or wages paid.

Tracking employee time with QuickBooks

Making sure everyone gets paid correctly is important for any business. While working out employee hours might seem straightforward, it can get tricky to do accurate calculations manually when your workforce grows. Doing it all by hand can make calculating employee hours tedious and overwhelming, costing you time and resources.

One of the most efficient ways to track employee hours is using time-tracking software. QuickBooks Time is a robust time-tracking system that lets office workers, remote employees, and freelancers clock in and out with just one click.

Get started today with QuickBooks Time and see how it can streamline and simplify employee timesheets.