How to Calculate Work Hours

Keeping track of work hours is crucial for employees and employers alike. For employees, understanding how to calculate work hours accurately helps prove their worth, become eligible for bonuses and compensations, and foster trust and reliability. Employers, on the other hand, calculate work hours to process payroll and determine productivity.

No matter which side of the table you’re on, calculating work hours accurately is a much-needed requirement for your workplace. And no, that doesn’t only mean you manually keep count of time. There are several methods of calculating and keeping track of work hours, both smart and automated.

In this blog, we’ll provide a complete guide on how to calculate hours worked and suggest advanced technological solutions. But let’s start by defining what we actually mean when we say “work hours.”

Work Hours: What is it?

When we say “work hours,” we mean the total number of hours an employee or worker is scheduled to work or has worked within a specific time period. The US Fair Labor Standards Act (FLSA) states that this should include the actual time spent on work-related activities that warrant an employee’s pay.

According to a 2022 survey, the average workweek for full-time employees is 47.6 hours, and the average workweek for all employees is 45.8 hours. 

Since total payment, bonuses, and incentives often depend on the exact hours worked, most companies have a policy of calculating the work hours of employees for a particular pay period.

Why Calculating Hours of Working Is Important

Calculating work hours diligently is important for legal, ethical, and administrative reasons. Firstly, determining the number of hours worked by a team member can help track your team’s efficiency and assess areas of improvement. It also lets you identify and address productivity roadblocks and hurdles in your workflow.

Secondly, it is also a legal obligation to calculate hours of work and pay employees accordingly. The FLSA dictates that workers in the US should receive overtime payment if they work more than 40 hours a week. The overtime pay is at least one and a half times the employee’s regular rate of pay.

Next, calculating work hours accurately is crucial for businesses that pay their employees hourly or frequently use contractors, freelancers, or part-time workers.

Tracking work hours helps organizations ensure compliance with labor laws, promote optimal productivity, and give employees their due for the workload. 

How to Calculate Hours Worked

Let’s start with the basics of work hour calculation: how to calculate the number of hours worked manually.

Step 1: Determine Start and End Time

The first step towards making an accurate time calculation is to record the start and end times of the work period accurately. To do so, you can use a manual timecard, time clock, or digital software, whichever best suits your business needs. We will discuss the pros and cons of all these options later in the blog.

To practice accurate timekeeping, you can also choose project management software solutions like Nifty for automated workflows, calendar integration, time tracking, and much more. These platforms centralize work hour calculation divided into specific projects and tasks, so that you can manage company resources better.

This will help you aggregate precise data and determine time periods of work to account for overtime, unpaid breaks, and other factors. It also helps employers and employees remain compliant with their work agreements and check if any additional compensation is applicable.

Step 2: Convert Time to Military Time

The next step is to convert time to the military format or the 24-hour clock for more simplified calculations. This means 10 AM is written as 10:00 and 6 PM is written as 18:00.

This format ensures there is no confusion between AM and PM, a common characteristic of the 12-hour clock. Using military time also helps make calculations easier by using subtraction without errors.

Step 3: Subtract Start Time from End Time

You can easily subtract the start time from the end time to get the number of hours worked by an employee. For example, if an employee’s start time is 10:00 and the end time is 18:00, the total number of hours worked is 18, subtracted by 10, which is 8 hours.

This way, you can easily find out the total number of hours worked in a specific time period.

Step 4: Subtract Paid and Unpaid Breaks

Another variable in this calculation is the number of hours covered in paid and unpaid break time. For instance, if an employee takes an hour off for lunch and a coffee break combined, you need to subtract unpaid breaks of 1 hour from the above calculation.

This means, the present number of work hours for the employee is 8, subtracted by 1, which is 7 hours. Hence, the average hours worked in a day for this specific employee will be 7 hours for that time period.

Step 5: Convert to Decimal Format

To make payroll calculations smoother, you need to convert the total work hours into decimal form. For instance, if any worker has an average working time of 8 hours 30 minutes, convert it to 8.5 decimal hours. If the working hours are a whole number (like 8 hours), they stay the same.

This step helps you simplify the calculation, taking extra minutes into account.

Step 6: Add Total Hours for Pay Period

Next, you need to add the total hours that an employee has worked over a specific pay period. If you calculate work hours daily, you can add them to get the total hours worked per week. Then, you can add the hours worked per week in a month to get the total monthly work hours for an employee.

For example, if the employee worked 35 hours the first week, 40 hours the second week, 38 hours the third week, and 32.5 hours the fourth week, the total for the month comes to 145.5 hours. 

The monthly work hours calculation is needed for payroll processing and to determine whether the employee qualifies for overtime payment or incentives. 

Step 7: Determine the Total Pay

The final step in calculating work hours is to determine the total pay for the work period. To do so, multiply the total work hours by the hourly pay rate. For instance, if the employee’s pay rate is $45 per hour and they worked 145.5 hours, the final pay amount is $6547.5.

How to Track Overtime Hours

Another factor in calculating work hours for payroll is overtime. You need to handle overtime hours carefully to ensure correct payment calculation. For that, first set a standard number of hours for an employee, for instance, 40 hours per week. Any extra hours beyond 40 can be considered overtime.

For example, if an employee works 42 hours a week, they are eligible for two hours of overtime. The overtime pay is determined based on your company’s policies. 

To ensure employees are compensated fairly for overtime work, you need to run regular audits and implement proper timekeeping services. This will help you avoid legal complications and instill a sense of goodwill in employees.

Now that you know how to calculate work hours, you need the right mediums and tools for hour tracking. This next section will help you with that.

Hour Tracking Options

There are many ways to perform hour tracking, with varied levels of technicality. Here are a few:

Handwritten timecards

This is the simplest way to keep track of working hours. Employees can note their total number of hours worked on a document and give it to their manager or HR. It has been a common practice to submit handwritten timecards every week to calculate the number of work hours.

When using handwritten timecards, the employee has more control over the card and can hand it in personally. However, it also introduces the risk of human error, which can be a hindrance to effective project management. 

It is also less accessible by the team and can lead to incorrectly recorded hours, misplaced sheets, and errors in data entry, which can further result in inaccuracies in payroll and billing. This is why most organizations have moved to other methods of calculating work hours.

Pros

• More cost-effective
• Offers control to the employee
• No need for any tools or software

Cons

• Less flexible and accessible
• Prone to errors and inaccuracies
• Can get misplaced easily
• Requires physical handling

Spreadsheets

The next form of hour tracking is spreadsheets. This is an upgrade from handwritten cards because spreadsheets have formulas you can use to calculate accurately. With tools like MS Excel and Google Sheets, small and mid-sized companies can easily track their employees’ working hours and generate reports.

For bigger companies, spreadsheets can be integrated into project management software for easier tracking and more automation. With Nifty Docs, you can embed spreadsheets and import data from .csv, .xls, and Excel files.

This lets you centralize data from a project and track work hours in one place. You can also apply filters to customize the view and only look at specific chunks of data at one time.

Using spreadsheets for time tracking has its own pros and cons.

Pros

• More scalable than manual timesheets
• Automates a part of the calculation
• Reduces the error margin
• Improves data visualization

Cons

• Can be difficult to manage large teams
• Not suitable for real-time tracking

Time Tracking Software

Time tracking software is a program that includes an hours calculator, enabling you to record accurate work hours on a portal with easy access and tracking. These tools can calculate work hours, log start and end times, deduct break hours, and add overtime.

Pros

• Automates hour tracking 
• Reduces human error
• Offers reporting capabilities

Cons

• Not too cost-effective for smaller and mid-sized organizations
• Has a bit of a learning curve

Project Management Software

Project management systems offer a holistic platform to plan, implement, and manage projects under one roof. You can assign tasks, track deadlines, record work hours, and much more with project management software.

Nifty is one such tool that enables time tracking and project management with automated workflows and AI-powered features.

Nifty’s time-tracking feature drives efficiency and smarter decision-making with its work-hour monitoring and tracking capabilities.

• Team members can record time on tasks across devices for effective collaboration and task management.

• You can also view a team member’s detailed logged hours with custom date ranges and specific projects or tasks.

• Get instant reports for project time management and perform effective resource allocation across teams and tasks with Nifty’s detailed time-tracking insights. 

• You can also export and print timesheets as CSV files or download them as PDF files.
• Import data from third-party applications like Jira, Trello, ClickUp, etc., or import your organization’s spreadsheets to centralize all data.
• Get the power of native integrations, workflow automation, and custom embeds for an all-in-one time tracking solution.

This allows you to balance workloads easily and gain an overall insight into projects and tasks in real time so you can plan future tasks and process payroll accurately.

Pros

• Streamlines workflows and automates daily tasks for higher productivity
• Offers project management, time tracking, and reporting capabilities under one roof
• Comes with flexible price points
• Is easy to integrate with other software
• Makes time calculation simple and accurate

Cons

• Needs a short learning curve
• Can be over budget for small businesses

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Time clocks

Time clocks have been a traditional way of tracking work hours for many decades. Employees can record their working hours by punching in and out every day, and the clock keeps track of how long they worked. 

This is a foolproof way of maintaining time for on-site workers. Time clocks can be of multiple types:

Mechanical time clock

This is a device inside which you place a paper timecard. The machine punches the card and marks the date and time on it. The employer can then calculate the worked hours using these timecards.

Electronic time clock

Electronic time clocks are another version of the mechanical time clock, but they are paperless. When employees present their badges in front of the device, a digital timecard with the date and their start and end times is stamped.

Electronic time clocks can also use fingerprints or a PIN to authenticate employees and record their working hours.

Time clock software

This type of time clock is software that runs on a computer or mobile device. You can log in to its website or app and click a button to record your start and end times of the day.

Time clock software can be configured to enable location services so employees can record their times while at the work location. This software also calculates the total payment based on the hours of work per pay period.

Pros

• Easy to use, with no learning curve
• Records worked hours accurately

Cons

• Generally not applicable for remote workers
• Requires significant expenditure to install physical time clocks
• Needs regular maintenance

Biometric systems

Organizations can also use biometric systems to calculate hours worked using facial recognition, fingerprints, or other biometric data. These systems are more secure for workplaces, and you cannot ask a coworker to punch in and out for you.

However, its availability and implementation are limited as many organizations cannot afford to install and maintain biometric systems. 

Pros

• Offers better security
• Keeps a more accurate record of worked hours

Cons

• Quite expensive to install and maintain
• Stores biometric data of employees, which can be a privacy breach issue

Payroll systems

Payroll systems are on-premises or cloud-based software platforms that help manage, maintain, and automate employee payments. They enable organizations to process payroll, remain compliant with tax and financial laws, and reduce overhead costs for payment processing.

Time tracking is one of the features of payroll systems, which works by integrating employee hours into the payroll calculation. This way, you can calculate accurate salaries based on tracking hours, regular work hours, breaks, and overtime rates.

Pros

• Integrates time tracking with other payroll functions
• Automates some time management tasks
• Ensures compliance with labor laws
• Reduces manual workload

Cons

• Can be costly for small businesses
• Requires training and onboarding for new users

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How to Pick the Best Work Hour Tracking Option for Your Organization

Now that we have covered all the different devices and software to track time, next comes the decision to choose one option for your organization. While each solution has its own advantages and disadvantages, the right decision depends on factors such as the size of your organization, business needs, budget, and so on.

However, there are a few factors to consider when picking the best time-tracking solution for your specific needs.

• Ease of use: The first factor should be user-friendliness. Your workforce needs to be able to use the software with no or minimal training, as training can also result in cost surges.
• Implementation feasibility: Another factor to consider is the feasibility of implementing the time-tracking solution. Some offices work better with physical time clocks, some with biometrics, some with project management software, and so on. Depending on your work and flexibility, choose the solution that can be implemented and scaled with the least difficulty.
• Integration with existing tools and workflows: Every organization has its set tools and workflow, and your work hour tracking option should integrate seamlessly with the existing infrastructure. For instance, if you’re looking for a project management platform for your team, find one with time-tracking capabilities. Similarly, if you work with spreadsheets, find a solution that can embed or import them.
• Cost and value: All of the above solutions have different cost structures. Some solutions are more suitable for small and medium businesses, and some for enterprises. When choosing a time tracker for your organization, find the right balance between the cost incurred and the value provided.
• Security features: Work hour tracking solutions have varied security measures. While biometric systems are the most secure, project management software has enough authentication policies to protect data privacy. Depending on the nature of your work and other specific security needs, choose a solution that offers your required security features.
• Reporting and analytics capabilities: Simply tracking time is not enough. Your solution needs to have reporting and analytics features to give you an insight into how many hours are going into which project, which resources are doing overtime, and so on. These reports help organizations plan work distribution and process payroll more accurately.
• Mobile access: Mobile-friendliness is the need of the hour. While physical time clocks are appropriate for some organizations, many others need to provide employees access to mobile applications. This has become more prevalent after the COVID-19 pandemic, with a rise in hybrid and flexible work models.
• Automation and AI: Many project and time management solutions provide automated workflows and AI-powered capabilities. With the help of such solutions like Nifty AI, you can automate flows, assign tasks, and sync calendars. Intelligent project management and time tracking are the future!
• Solid customer support: Implementing or integrating a new time-tracking solution means being prepared for issues and queries. Solid customer support helps greatly in this aspect. Whether performing maintenance activities on an electronic time clock or resolving a ticket on your project management software, a responsive and capable customer support team is a necessity.

Track Work Hours Better with Nifty!

The right time-tracking software can do much more than record time! It can boost efficiency, generate real-time reports, break down work hours by projects and tasks, and offer a centralized view of the team’s resources.

With Nifty, you get all of these and much more at competitive charges. Don’t settle for a mediocre project management tool. Give your organization the Nifty boost, and forget to juggle multiple tools for project management tasks. 

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