How To Calculate Employee Work Hours Step by Step

The payroll process starts when your employees clock in and ends when you distribute funds. In between there, though, is another extremely important step that serves as the foundation for everything that comes after it: using the time data to calculate work hours.

Without this step, timecards are nothing but a long list of numbers that aren’t relevant to writing paychecks. You have to transform those start and end times into total hours worked (for the day or the week) in order to figure out how much your business has to pay each team member.

That’s where learning to calculate work hours comes in.

In this article, we give you tips for making that calculation easier and for improving the system from start to finish.

Calculating work hours

1) Track time with software

One of the best ways to track time and calculate work hours is with a software solution like Sling. Software allows you to set the parameters for tracking time (we’ll discuss two important ones next) and then does much of the work for you.

Some apps can even take the process from a start and stop time to total hours worked for the day. If you’re doing things manually from there on, you can then take that number, multiply it by the employee’s pay rate, and figure out how much you owe them for the work they did.

2) Use the 24-hour time format

Regardless of whether you calculate work hours manually or let software do it for you, you can simplify the process immensely by using the 24-hour time format.

The 24-hour time format is much easier to incorporate into a formula for figuring out the total time an hourly employee worked every day. Here’s how it compares to the standard time format.

In standard time, your employees’ start and stop times on their timecards look like this:

Start: 8:00 a.m.
Stop: 5:00 p.m.

With those numbers, there’s no direct way to figure out the total time worked.

In 24-hour time, your employees’ start and stop times on their timecards look like this:

Start: 0800
Stop: 1700

With those numbers, you can simply subtract 0800 from 1700 (or 8 from 17) to find total time worked (17 – 8 = 9).

3) Round numbers to the nearest 15 minutes

Another parameter that makes calculating work hours much easier is rounding numbers to the nearest 15 minutes.

Here’s how it works.

Employee work time from one to seven minutes is rounded down.
Employee work time from eight to 14 minutes is rounded up.

So, if Vanessa clocks in at 0758 (24-hour time) and clocks out at 1707, she’s worked a total of nine hours and nine minutes. With the rounding rule in place, you would round up to nine hours and 15 minutes and use that to calculate Vanessa’s pay for the day.

4) Change minutes to their decimal equivalent

To figure out an employee’s paycheck, you multiply their hours worked by their pay rate (e.g., 9 hours x $10/hour = $90).

But, that basic math doesn’t extend easily to minutes worked. Minutes are a fraction of an hour so, for example, you can’t just multiply $10/hour by 6 and come up with the correct amount (if you do, you’re going to be drastically overpaying your employees).

Instead, you have to convert minutes to their decimal equivalent.

Off the top of your head, can you change 6 minutes into its decimal equivalent? Probably not without a calculator. And that’s OK. Because the rounding rule we discussed earlier makes figuring out decimal equivalents much easier.

Most people will be able to quickly figure out that 15 minutes is one-quarter of an hour (or 0.25). Similarly, 30 minutes is half an hour (0.5) and 45 minutes is three-quarters of an hour (0.75).

These are the numbers you’ll need to use to figure out what you owe each employee for their day’s work.

Let’s continue with Vanessa’s example from the previous section and see how it works out.

Vanessa worked nine hours and 15 minutes. As we mentioned, you can’t multiply her pay rate by 15 and expect to get an accurate dollar amount. Instead, you convert those 15 minutes to their decimal equivalent (0.25) and come up with a total of 9.25 hours worked.

Now, when you multiply that number by Vanessa’s pay rate, you’ll find the correct dollar amount you need to pay her ($10/hour x 9.25 hours = $92.50).

5) Include break hours

Break hours can have a big impact on how you calculate work hours. If your employees don’t clock out when they go on break, you’ll need to subtract the time spent away from work from their total hours for the day.

For example, all employees receive an hour for lunch every day. Vanessa worked a total of 9.25 hours one day, but she didn’t clock out when she went to lunch.

When you calculate her total hours worked for the day, you have to subtract one hour from the total shown on her timecard (in this case, 9.25 hours – 1 hour = 8.25 hours).

If you don’t include this step when you calculate work hours, you’re going to be paying Vanessa for an hour she didn’t work that day. In this case, that’s $50 a week, $200 a month, and $2400 a year.

Do that for all your employees, and the numbers will quickly affect your bottom line for the worse.

How to improve payroll from start to finish

Stay up to date on labor laws

Once you learn how to calculate work hours using the tips in the first part of this article, the process won’t change — you’ll always subtract start time from end time, convert minutes worked to decimal equivalents, and remove any break hours.

But, if you choose to take it to the next step and calculate payroll yourself, the process may change from one year to the next.

That’s why it’s so important that you stay up to date on all federal, state, and local labor laws that may apply to your business.

If you’re unsure about how to set up and run your payroll system, the best thing you can do is talk to an accountant who is familiar with your industry.

Consider outsourcing the payroll part

There are a lot of variables that go into figuring out the dollar amount that you owe your employees for the time they worked. And, as mentioned in the previous section, those variables can change from year to year.

While you can always calculate hours worked in-house just to see how much time your employees are spending on the job, there’s nothing wrong with outsourcing the actual payroll part to an accountant or other professional third party.

They’ll be current on all labor laws and will have the knowledge, experience, and computational skills to accurately calculate your payroll every time.

Review timecards before payroll

Even if you outsource your payroll, it’s a good idea to review the timecards before you send them off to be processed.

Calculating work hours yourself and reviewing the numbers on each timesheet can help:

Ensure accuracy
Minimize errors
Catch small problems before they become big problems
Prevent these problems from affecting payroll
Avoid unauthorized overtime
Eliminate intentional and unintentional time theft

Sling can help you calculate work hours like a pro

Using the tips on this list, you can learn to calculate work hours like a pro. But keep in mind that “translating” employee start and stop times into a number you can multiply by their pay rate is only a small piece of the puzzle.

The process includes other variables such as overtime, lunch breaks, time off, and even the way you schedule your team. So, it’s not just about calculating work hours, it’s about managing your workforce better.

That’s where Sling can help.

Sling is an all-in-one workforce management tool that can help you organize and optimize many of the fundamental components that make your business run, including:

Sling even offers integrations with other common business software such as Toast, Shopify, Square, Gusto, POSitouch, HarborTouch, and Restaurant Manager.

Try Sling today to experience firsthand how the app can help you calculate work hours, schedule your employees faster and better, and manage a team of any size.

This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for specific advice.

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