How to Calculate Work Hours and Pay
If you have hourly paid employees then they most likely will keep track of their hours, so they get paid the correct amount on pay-day. I don’t know about you, but getting paid the right amount is a very personal and touchy subject. There is nothing more annoying than not being paid for hours worked.
By reading our “step-by-step” guide below, we will show you how to calculate work hours and pay, and how to make sure that the hours worked, time off, and amounts are accurate. Let’s get started.
How to calculate work hours and pay
Probably one of the most important tasks any employer has on his list of endless tasks. However, it is often put on the back burner, until the time comes when it must be done if the employees are going to be paid and kept happy.
So how do you calculate work hours and pay so that it never becomes a chore and everyone is paid correctly? There are various programs that will do all the calculations for you after the employee’s hours have been entered. Spreadsheets can be set up to do the calculations to get to the total amount of work hours, even be able to record the individual employee’s hours in a timesheet (This is discussed later in the article).
What constitutes work hours?
Works hours (workday), according to the United States Department of Labor, is defined as the period of time when an employee engages in his/her “principal activity” until the time when he or she stops that activity.
Work hours are generally recorded on time cards/timesheets, either physically or electronically depending on the business policy. As such, those time records become a legal document and if required, can be produced as evidence.
The different types of work hours include Full-time, part-time, and overtime. Today, full-time hours are set to 40 as stipulated by the Fair Labor Standards Act. Part-time hours are decided upon between the employer and the employee, and overtime is where an employee works over the hours set and must receive additional payment for those hours.
To be effective in calculating work hours, you should:
1. Choose Your Recording method
Before you calculate the hours worked, you need to decide on the method of recording those hours. Paper timesheets? Mechanical time clock? Computerized time-tracking? All choices are to be made before any calculations can be done.
2. Select the Time format
Do you follow the 12-hour or 24-hour time system? The easiest way of recording time is by using the 24-hour or military clock system.
3. Select your rounding policy.
The U.S. Department of Labor has a policy that allows fifteen minutes for you to decide if an employee is late for work or not. This “Rounding Policy” means that if the start time is 08:30, employees can “clock-in” up until 08:45 and still be considered on time. Clock-in at 08:46 and they’re late and get paid accordingly by deducting fifteen minutes.
How to calculate payroll hours and minutes manually
The following steps should put you on the right track
1. Work out the start time and the finish time
Simple isn’t it? You just record when you start work and when you finish. Subtract the start time from the finish time and you’ve got the hours worked.
Except, if the start time is 8:30 am and the finish time is 4:45 pm, how do you subtract 8 from 4? You can’t because you will end up with a negative number. Try it using a calculator. 4 minus 8 equals -4. But you didn’t work negative four hours. You actually worked over eight hours. So what’s the answer. Use the 24-hour or military clock.
2. Convert all times to the 24-hour or military clock times
One of the biggest headaches for people trying to calculate how many hours they have worked is working out the AM and PM times. Military time uses the 24-hour clock, so any time from midnight until before 1 pm, stays as they are, but from 1 pm until midnight, you add twelve hours to the time. So in our start and finish times above, 8:30 am becomes 08:30, and 4:45 pm becomes 16:45.
If you had a particularly long day, starting at 3:15 am and not finishing until 11:00 pm you would have 03:15 and 23:00.
3. Subtract start time from finish time
Now that you have converted all the times to military time when you subtract 08:30 from 16:45 you get 8:15. This equates to eight hours, fifteen minutes.
In our long day example above, 23:00 minus 3:15 gives you 19:85, which is wrong. A simple adjustment called “Math Borrowing” solves the problem. Instead of 23:00, enter 22:60 then subtract 3:15. The answer is 19:45. 19 hours and 45 minutes.
4. Subtract break times
Hourly paid workers are generally not paid for break times, so you must deduct those.
Start time 08:30, finish time 16:45, equals 8:15. Assuming one hour is unpaid for lunch, you now have 7:15. You worked for 7 hours and 15 minutes.
5. Convert times to decimals
To make sure the calculation of the number of hours multiplied by the hourly rate is correct you need to covert the times to a decimal format. Just divide the minutes by 60 to get the decimal equivalent.
15 divided by 60 = 0.25, therefore 7.25 hours.
6. Calculate total pay period hours
Add up all the paid hours worked during the pay period, and multiply the total by the hourly rate. This will give you the total gross pay due.
How to create a timesheet in Google Sheets
Google Sheets is a versatile spreadsheet and can be used to create timesheets. To start, log in or create a new account at Google.com, then open up Google Sheets, and select Blank worksheet. This opens up a new spreadsheet for you.
1. In the first cell (A1), enter a heading of EMPLOYEE NAME, hit enter.
2. In cell C1, type in DATE
3. Cell D1, type TIME IN
4. Cell E1, type TIME OUT
5. Cell F1, type HOURS WORKED.
If you wish, you can make the heading bold so they stand out.
Next in Cell A3, type in your name, just to test the sheet.
6. Select column C, and from the 123 menu dropdown, choose Date. This ensures the cell has the correct format displayed and will be correctly used in calculations.
7. Select column D, select the 123 menu dropdown and choose Time. The same applies to the time input. It must be entered in the correct format to be calculated properly.
8. Do the same for Column E.
Now each cell in column C will be formatted to display a date, and the cells in columns D and E will display a time
9. Now select column F and from the 123 dropdowns select Duration. This will automatically format the cell to display the time spent at work.
One of the challenges faced when working with Sheets is getting the dates and times entered correctly. There is a function under the Data menu selection, called Validation. Once this is set up correctly, any date or time that does not follow the correct format will be rejected, and you will be prompted to re-enter in the proper format.
To do this, click on the Data menu, and from the dropdown, select Data Validation. Once the validation window pops up complete it with the cell range Sheet1!C3:E16, Criteria set to date – is a valid date, On the invalid date, select the Reject input and finally check the Show Validation Help Box and enter – Enter a valid date or time 10/1/21 or 14:30 in the box.
Once the validation is set up you need to enter this formula in cell F3 to F26 –
The spreadsheet will now calculate the hours worked each day
If there are unpaid breaks involved, lunchtime, for example, you need to modify the spreadsheet by inserting two extra columns before the Hours Worked column, with break start and break end as the headings. The formula will have to be altered to be:
Following these steps should make it possible for you to create a comprehensive timesheet using google sheets.
How to keep track of employee time off
Before you decide on the best way to track time off, you need to establish your time-off policy. Which time off days is going to be paid (PTO)? Are some days unpaid? You need to decide how much PTO each employee is entitled to. Do they accrue PTO days each month they work, or do they get their full allowance upfront?
Once the policy is in effect then comes the task of keeping track of every employee’s time off, recording whether it is paid or unpaid.
There are various ways to keep track of time off, the simplest of which is to use Time-Off Request Forms.
These forms will have information pre-printed on them such as:
- Date of the request.
- Employee Name.
- Job Title.
- Whether it is PTO (Vacation/Sick leave.)
- Start Date and end date
You could also include details like Bereavement Leave, Jury Duty Leave, or another leave request not covered previously.
After each request has been approved, the form should be kept with the payroll paperwork, and checked before each payroll period is run. Within the payroll paperwork, each employee’s folder should show how much of their PTO they have left, updated when necessary.
If using paper is not for you, then a spreadsheet can be created to do the job. If you are adept at using spreadsheets, you can create the spreadsheet to have all your employees listed with one tab for the total amount of PTO hours they can take for vacation, sick leave, etc., and separate tabs for each month of the year, with the days of the month listed.
There are numerous free spreadsheet templates available online for you to modify to suit your needs. One template that may be suitable can be found here.
Time Tracking Software
While the two methods discussed above are free, they do involve time and effort on someone’s part to get them up and running. Various PTO Tracking programs are at your disposal that will help in keeping track of employee time off.
A PTO tracking program can be an invaluable tool for your business. It allows users to enter the vacation and other paid time-off entitlement for employees, and the system will then automatically calculate the remaining PTO days. It can also show you who is at work and who is absent, and for what reason, vacation, sick, or personal time off.
How to calculate how much you make a month
Nowadays it is unusual for a job to pay monthly, but your mortgage, utilities, rent, and credit card bills are all due each month. Figuring how to calculate how much you make in a month is an essential step if you are trying to keep to a budget.
One thing to bear in mind, however, is the amount you make each month is your gross pay, what you actually receive is your net pay. Your monthly gross pay is simpler to work out than net pay, because of the taxes, and other deductions your employer must withhold from your pay.
If you are paid by the hour, weekly, or bi-weekly, or if you know how much you get paid annually, then you can calculate the monthly amount by simple calculations. Once you know this figure, you will be able to put this into your budget and have a better idea of how much you have to spend on essentials, and hopefully leave a bit over for those little extras.
Calculating gross monthly pay if you get paid by the hour
Look at your most recent paycheck, which will show the hours you worked, and your hourly rate of pay. The calculation to work out your monthly payment is:
GROSS PAY PER MONTH = HOURLY RATE MULTIPLIED BY HOURS PER WEEK MULTIPLIED BY 52, THEN DIVIDED BY TWELVE.
If you work different hours from week to week work out an average number of hours and use that figure.
Using the calculation above, if you are paid $17.50 per hour, and you work, on average, 39 hours per week, your gross weekly pay is $682.50. Multiply $682.50 by 52 equals $35,490.00 per year, divided by 12 gives you a monthly gross pay of $2,957.50.
If you are not on an hourly rate and get paid bi-weekly
Getting the same amount of pay every two weeks, is an easy calculation to work out your monthly payments. Take your gross pay from the last paycheck, multiply the amount by 26 then divide the answer by 12.
Using the figures in the above example, you receive $682.50 per week, or $1,365.00 every two weeks. $1,365.00 multiplied by 26 equals $35,490.00, divided by 12 and you get that same monthly amount, $2,957.50
To sum up:
Calculating work hours, and pay, needn’t be a chore.
Once your employees’ hours have been recorded, then by following our few simple steps, calculating work hours will become second nature.
Creating a timesheet in Google Sheets is also fairly easy once you understand the concept.
Using formulae in Spreadsheets is the key to an accurate timesheet, and our guide gives you an example of how to do it.
Keeping track of time off can be made simple, by using paper forms, spreadsheets, or time tracking software.
Working out how much you make per month, can be achieved with a simple calculation
The above article may contain affiliate links, which help support Clever Sequence
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