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How to calculate hours worked

November 19, 20217 min read

Calculating the hours worked by employees is vital to ensuring they receive their accurate pay. It can also help you measure the productivity of your workforce and ensure you comply with time-tracking laws. While determining how many hours employees work can be a complex subject, time-tracking tools can make the process easier.

In this article, we’ll cover how to calculate hours worked from start to finish, dive into the importance of calculating hours worked and discuss the tools you can use to do it. Use the links below to navigate the post or continue reading to learn everything you need to know about determining hours worked.

How to calculate hours worked: step-by-step instructions
How to track employees’ hours
Wrapping up

How to calculate hours worked: step-by-step instructions

To help you accurately calculate hours and minutes worked, we’ve provided this step-by-step guide. Note that the instructions below may change slightly depending on your needs.

1. Choose a recording method

Start calculating time worked by first choosing a method to record time. Here are a few of the most common methods:

We’ll cover these time-tracking methods in more detail later on.

2. Set a start and end time

When tracking hours worked, you’ll have to set a start and end time. This will be the time your staff clocks in and out each workday; for instance, if an employee works a shift from 8 AM to 5 PM.

3. Set a rounding policy

Per the Fair Work Act (FWA), employers are allowed to round up time worked by employees to the nearest quarter hour. This is to offset employees that don’t clock in or out on time. Time that’s between one and seven minutes may be rounded down, while time between eight to 14 minutes can be rounded up. If an employee clocks in at 8:06 AM, you can round down to 8:00 AM. If they clocked in at 8:09 AM, you can round up to 8:15 AM.

4. Convert time to 24-hour time

To do this, simply add 12 hours to times ranging between 1 PM and 11:59 PM. Any times outside of this range will be left unchanged. Here are a few examples:

7:00 AM is 7:00
9:30 AM is 9:30
12:00 PM is 12:00
1:00 PM is 13:00
5:00 PM is 17:00
11:59 PM is 23:59
12:00 AM is 0:00
1:00 AM is 1:00.

Since you’ll no longer have to use AM and PM, distinguishing the times employees start and end their shifts will be easier.

5. Convert minutes to decimals

You’ll then have to convert minutes worked to decimals by dividing them by 60. You’ll find the formula below:

minutes worked60

If you had to convert 8:30 to a decimal, you would divide 30 by 60 to get .50. This would make the time 8.50.

6. Subtract the start time from the end time

Converting minutes to a decimal value makes it simpler to subtract the start time and end time.

Let’s say an employee clocked in at 8:30 AM and clocked out at 5:30 PM, or 8:30 and 17:30. When you convert the minutes to decimals, you’ll get 8.50 and 17.50. Then, you’ll subtract:

17.50 – 8.50 = 9.

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7. Subtract unpaid time for breaks

Make sure to take into account unpaid breaks or time off when you subtract the start time from the end time. This allows you to pay employees for billable hours only. Unpaid breaks are typically any time where employees aren’t actively carrying out their job duties, such as meal periods.

Using the example from the last step, you’d subtract a one-hour lunch break from the total calculated.

9 – 1 = 8.

So, this particular employee worked eight hours.

8. Complete a table of weekly hours

Once you calculate how many hours employees have worked in a day, you can create a table to determine their weekly hours. You’ll be able to see how much an employee has worked each week and note if it aligns with company policies. This also makes calculating employee checks much easier.

If you’re looking for an inexpensive way to calculate hours worked per week while avoiding tedious calculations, check out our free timesheet calculator. The time card calculator is easy to use, allowing you to input various pieces of data, including pay rates, unpaid breaks and overtime rates. Then, you can download a CSV (comma-separated values) file of the table to retain for your records.

What are hours worked?

According to the Fair Work Act, hours worked is any time during which an employee performs their job requirements. This includes being on duty at the employer’s premises or working remotely. Employers must pay non-exempt employees at least the federal minimum wage for all hours worked, with the exception of meal periods. Also, employees that voluntarily work off the clock to complete tasks and projects are entitled to receive compensation for this time.

How many hours employees work typically depends on whether they’re full-time or part-time, or required to stay past the end of their shift. Note that the Fair Work Commission doesn’t offer a definition for full-time or part-time employees. Instead, this distinction is left to employers to decide. Despite this, both full-time and part-time employees are protected under the FWA, as long as they are non-exempt.

Full-time work

Since the FWA requires employers to pay employees overtime wages for working more than 38 hours, many people consider this full-time work.

Part-time work

For employees to be considered part-time workers, they will typically have to work less than full-time employees. This can range anywhere from 17 to 34 hours per week. Just like for full-time work, this will depend on the employer.

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. So, if your employee earns $20.00 per hour and works 39 hours, you’d pay them $30 for that extra hour.

How to track employee hours

To remain compliant with the FWA’s recordkeeping requirements, employers must keep a record of the hours worked by employees. However, the FWA doesn’t require you to track these hours in any particular way as long as the times accurately reflect the time worked.

The method you choose to track hours will ultimately depend on a few factors, such as business size, number of employees and company budget. That said, here are a few tools for tracking employee hours to help you get started:

Mechanical time clock. A mechanical time clock allows employees to place a paper time card into a machine where it’ll automatically stamp the date and time of their shift.
Electronic time clock. An electronic time clock works similarly to a mechanical time clock, except that it’s digitally managed. So, employees will scan a badge, input a pin or scan their fingerprint to punch 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. One such software is QuickBooks Time, which can help you streamline employee time tracking.

Wrapping up

Ensuring employees receive accurate wages time after time is essential. While calculating employee hours may seem like a straightforward process, it can become challenging to make these calculations by hand as your workforce grows. Manual work can make the process of calculating employee hours tedious and overwhelming, costing you valuable resources and time.

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

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

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January 14, 2015

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How to calculate hours worked

How to calculate hours worked: step-by-step instructions

1. Choose a recording method

2. Set a start and end time

3. Set a rounding policy

4. Convert time to 24-hour time

5. Convert minutes to decimals

6. Subtract the start time from the end time

Grow Your Business with QuickBooks

7. Subtract unpaid time for breaks

8. Complete a table of weekly hours

What are hours worked?

Full-time work

Part-time work

Overtime work

How to track employee hours

Wrapping up

Related Articles

Looking for something else?

Get QuickBooks

Help Me Choose

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