How to Calculate Hours Worked

You must know each employee’s hours worked to run payroll. To do that, you must calculate hours worked. So, what does the process of calculating hours worked look like? Learn how to calculate hours worked step-by-step below, plus get an in-depth example.

*I don’t want to do the calculations. Show me how software can do the calculations for me!

What are hours worked?

According to the Fair Labor Standards Act (FLSA), “hours worked” includes the compensable time an employee is on duty at a workplace. Employees are entitled to wages for all hours worked.

The FLSA defines what constitutes working and non-working time. Generally, determining hours worked is easy—you must pay employees when they work. But some situations can throw a wrench into knowing how to calculate hours worked.

Depending on the circumstances, the following may or may not count as FLSA hours worked:

On-call time: Generally, pay employees for on-call time if you require them to remain at your business or in such close proximity that they can’t use their time for their own purposes.
Rest and meal breaks: Generally, pay employees for rest breaks of 20 minutes or less. You may need to pay employees for meal breaks if they are not fully relieved of work duties.
Sleeping time: Pay employees who are required to be on duty for less than 24 hours and permitted to sleep when not busy.
Training: Pay employees for mandatory training they attend during regular working hours.
Travel time: Pay employees for travels as part of their principal job activities, special one-day assignments to non-work locations, and work-related activities. Also, pay employees for travel time that keeps them away from home overnight when it’s during regularly scheduled work hours and for work while traveling.
Waiting time: Pay employees for time when they are engaged to wait, aka when you require them to be at work and wait for work to do.

Understand the FLSA’s guidelines to correctly calculate and run payroll for all hours worked. And remember, your state or locality may have its own special guidelines (e.g., employee break laws) that differ from the FLSA. Generally, employers must follow the law most favorable to the employee.

Consult FLSA rules and your state and local laws for more information.

You can calculate hours and minutes worked for one day or the entire duration of the pay period. You need to calculate total hours worked for the pay period to run payroll.

Learn how to calculate hours worked with these three simple steps:

Calculate hours and minutes
Convert payroll minutes to decimals
Multiply hours worked by wage rate

1. Calculate hours and minutes

First, look at the employee’s start and end times. When did they start and finish work?

You may want to convert the time to a 24-hour format, or military time, to calculate hours worked. Military time applies to afternoon and evening hours beginning with 1:00 p.m. and ending with midnight. Add 12 to any time between 1:00 p.m. and midnight for the 24-hour format. For example, 2:00 p.m. is 14:00 in military time (2 + 12 = 14).

Add up the total hours an employee worked each day. You can do this by subtracting the employee’s start time from their end time for each workday. Make sure to subtract any non-compensable breaks (e.g., lunch). Then, add together all hours worked during the pay period.

Do not include overtime hours worked. This is a separate calculation (step 4).

2. Convert payroll minutes to decimals

Sometimes, an employee may only work a fraction of an hour. Convert the employee’s minutes to decimals.

You can convert minutes for payroll by dividing the minutes worked by 60. For example, 15 minutes worked is 0.25 hours (15 minutes / 60).

3. Multiply hours worked by wage rate

Multiply your employee’s hourly wage by their total hours worked (in decimals) to get their total regular wages.

4. Add in overtime hours, if applicable

Did the employee work any overtime hours? Are they a nonexempt employee entitled to time and a half pay for overtime hours worked? If so, adjust for overtime.

The federal overtime law requires that employers pay nonexempt employees at a rate of at least one and one-half times the employee’s regular rate of pay for each hour worked in excess of 40 in a workweek. But, overtime laws by state vary. For example, California requires overtime pay for any employees who work more than eight in a workday.

Calculate hours worked example

Confused? See how to calculate hours worked with this example.

You use a weekly pay frequency. Your employee, Dave, records the following for his hours worked:

	Mon	Tues	Wed	Thurs	Fri
Start Time	8:00 a.m.	8:00 a.m.	8:00 a.m.	8:00 a.m.	8:00 a.m.
End Time	4:15 p.m.	4:15 p.m.	4:15 p.m.	4:15 p.m.	4:15 p.m.
Lunch Break	1 hour	1 hour	1 hour	1 hour	1 hour

Let’s look at Monday. Dave clocked in at 8:00 a.m. and clocked out at 4:15 p.m. He also took a one-hour lunch break, which does not count as hours worked.

Military time: You can convert 4:15 p.m. to military time, which is 16:15 (4:15 + 12:00).

Subtract 8:00 from 16:15 to get 8:15. Also subtract 1:00 hour for Dave’s lunch break (8:15 – 1:00). Dave worked 7:15, or seven hours and 15 minutes.

Convert to decimals: Now, you can convert 7:15 to a decimal by dividing 15 by 60 and adding the total to the seven hours.

15 / 60 = 0.25 hours
7 hours + 0.25 hours = 7.25 hours

Dave worked 7.25 hours on Monday. Because he worked 7.25 hours each of the five workdays in the pay period, you can multiply 7.25 by five days to get his total hours worked.

7.25 X 5 days = 36.25 total hours worked

Multiply Dave’s hours worked during the pay period, 36.25, by his hourly wage of $20.00 to get his gross pay.

36.25 hours X $20.00 = $725.00

Dave earned $725.00 in gross wages for working 36 hours and 15 minutes during the pay period.

How to track hours worked

The FLSA says that you can use any timekeeping method you want. However, your timekeeping method must be complete and accurate.

Do you know how to track employee hours? You have several options.

You can track hours worked with:

Time cards: Employees record their hours worked on paper, using a spreadsheet, or using time and attendance software.
Time clocks: Employees clock in and out of work using a physical or digital time clock.
Timekeepers: Someone (e.g., you) tracks employee hours worked.

Whatever method you use, communicate your company’s timekeeping processes to your employees.

Simplify time tracking with software

Accurately calculating hours worked is crucial for compliant and accurate payroll. Ensure your employees are fairly compensated for their work time by understanding the Fair Labor Standards Act and your state and local regulations.

Manually calculating hours worked can be a daunting task prone to errors and inefficiencies. But with an integrated timekeeping and payroll software, you can automate this process from start to finish, significantly reducing errors and saving valuable time.

Patriot Software offers online payroll and a time and attendance add-on that integrates seamlessly. Here are just some of the benefits:

Time savings: With this kind of software combo, you can track and approve employee time cards and send the hours directly to payroll—no manual calculations are needed.
Time tracking: Employees can enter their total hours worked or “punch” in and out digitally online or through a mobile app.
Recordkeeping: Integrated timekeeping and payroll software systems also simplify your recordkeeping responsibilities. The Fair Labor Standards Act requires that employers keep time cards and similar records for two years and payroll records for at least three years.

Embracing automation enhances accuracy and frees up your resources for what matters. You’re not just simplifying payroll—you’re investing in your business’s future efficiency and success.

Just think: What could you do if you could redirect the time saved on manual payroll processes?

This is not intended as legal advice; for more information, please click here.