A Easy Guide on How to Calculate Work Hours

There’s a lot of math involved with running and managing a business. Like, a lot. And while some equations are pretty simple, some equations involve a lot of ‘well, except for this…’. That’s the case for how to calculate work hours. But, no worries, because we're going to teach you the difference between work hours and non-work hours with some examples, the types of work hours, the most common struggles businesses face when trying to figure out working hours, and then we dive into the actual equation. If that sounds like a lot, don't worry. We’ve got some solutions that are going to make this all easier on you. So keep reading, it gets better (we promise).

What is the definition of ‘work hours’ vs. ‘non-work hours;?

First off, what exactly are work hours? Simply put, work hours are the hours that an employee is actually working. This includes any time that they’re required to be on duty, on the job site, or actively engaged with work-related tasks. Even though it’s a pretty basic definition, things can get a little more complicated when you have a team at different locations—like construction sites—or you have employees who are on call for a busy Saturday shift at the bar in case you need more hands. Non-work hours, on the other hand, are times when the employee is not working, such as break times or off-duty hours. Again, this can get tricky when you have on-call employees or have multiple locations.

Examples of work hours vs non-work hours

Let’s explore some examples of work hours vs non-work hours. Once you're crystal clear on what constitutes ‘on-the-job’, it makes it easier to calculate work hours.

1. On-call employees

Let’s say you run a restaurant and you know there's a big game on Saturday. You may want to have some employees on call to give some relief to those on duty if you get slammed. If you have your team come into work doing roll-ups or polishing silverware, those are work hours. If you expect them to be at a certain location for a specific amount of time just in case, those are work hours. Basically, anything that prevents them from going about their day? Yup: work hours. If you have those team members keep their phones on them but they can run errands or sip coffee and Netflix, those are non-work hours. If you call them in, the moment they clock in they’re on work hours.

2. Movement between locations

If you run a construction business or multiple locations of coffee shops, you know how complicated it can be to run employees all over town to support different locations. When an employee is travelling to work—what could constitute as their designated location for the day—those are non-work hours. That is a typical commute to work. But if an employee has clocked in for the day and you ask them to run 10 sleeves of coffee cups to another location uptown, those are working hours. Same goes for construction teams or supervisors who may need to do work at several locations in one day. If they’ve clocked in, their travel time from one location to another counts as working hours and they need to be paid.

3. Skills training times

Hair stylists, nail technicians, waxers: they all need to stay on top of their skills. With product updates and new techniques, there's always something to learn If your salon is offering a new service or wants to update one of its processes and your team needs to learn these new skills, those are working hours. When a business asks its employees to obtain specific training, they need to pay their employees for those hours. Conversely, if an employee is interested in learning how to do vivids and they sign themselves up for a weekend training, those are non-work hours. Even though that training benefits your business, the employee volunteered their own time to learn a new skill.

Types of work hours

There are a couple of types of work hours you're going to want to be aware of. These determine how you categorize those hours for your employees when it comes to payroll time.

1. Part-time hours

Simply, part-time hours are anything less than the full-time limit that an employer defines (we’ll get to that next). This is pretty common for hourly employees working in places like restaurants, retail stores, or cafes. There are no real specific statutes around part-time hours so employers are left to set those policies in contracts with their employees. Employees just have to work the hours they agreed to in their onboarding paperwork. The standard amount of hours a part-time employee works is half of the maximum number of full-time hours or slightly more. In case that made your head spin a bit, here's an example: if your full-time employees work 40 hours a week, your part-time employees would work 20 hours or slightly more. The danger in having your part-time employees work close to or the same amount of hours as your full-time employees is that they can start to resent not receiving the same perks as the full-time employees—things like benefits and paid time off. So keep an eye on those part-time hours regularly creeping up for certain employees.

2. Full-time hours

Full-time hours are the maximum time employees can work within a specific time period. The standard in the US is 32-40 hours over a one week period. This is pretty typical. Although, companies across the world are starting to institute 4-day work weeks with the same expectations on hours. The benefit of working full-time is knowing exactly how many hours you work each work, which translates to a reliable paycheck. It also helps businesses forecast their labor budget. Whatever you decide as a business, just make sure you have a clear policy in your onboarding manual and hiring contract. Another advantage of employees working full-time is that they often get offered health benefits and paid time off. This can entice people to sign up to fill those full-time hours that your business may desperately need to fill on a more consistent basis.

2. Overtime

Overtime hours are defined as any time worked over 44 hours in one week. This was determined by the Fair Labor Standards Act (FLSA) to protect employees. Once an employee heads into overtime hours, their pay rate changes to time and a half for those hours above and beyond 44. Example:An employee makes $15/per hour. One week they pick up two shifts from a sick co-worker, making their total hours 50 for that week.Their overtime rate would be $15 x 1.5 = $22.50Their pay for that week would look like this:44 regular hours x $15 = $6606 overtime hours x $22.50 = $135$660 regular pay + $135 overtime pay = $795 weekly pay

Struggles businesses face when calculating work hours

Work hours are something you can’t mess with. You need to know the ins and outs because there are legal repercussions if businesses are incorrectly calculating work hours. And hey, we don’t want that to happen to you. We know this is a lot of explanation to learn how to calculate work hours, but all of the pieces are fitting into a bigger picture. Many businesses struggle with calculating work hours, so we're here to help. Some of the challenges that businesses face include:

• Tracking employee arrival and departure times accurately: Depending on the system you use, recording employee clock in and clock out times can cause accounting headaches.
• Accounting for overtime: Overtime hours can sneak up on businesses and some don’t even know the rules around it—luckily you do now.
• Calculating proper break times: Do your employees clock out for break times? Are they entitled to paid breaks? How long should they be? There are a lot of questions that can confuse calculating work hours.
• Dealing with travel times: If you have a mobile team, calculating hours that they’re on or off the clock can get messy.

Now that you have all of these pieces on your radar, we can start to put them together to calculate work hours.

How to calculate work hours

Manual calculation is the most common method of calculating hours worked for an hourly employee. Here’s how you do it.

Step 1: Start and end time

You're going to start by collecting the start and end time for each employee. Whether you use manual time sheets, a punch clock, or software, you are going to need to collect all of those clock-ins and clock-outs. For our example, let’s say your employee clocked in at 10am and clocked out at 5pm on Monday. Let’s calculate their work hours as we move through the steps.

Step 2: Convert the time

The next step is to convert the time to a 24-hour format. This is going to make the calculation so much easier on you. A quick lesson on converting times to a 24-hour clock: For any time after 1pm, add 12 hours. So, 1pm becomes 13:00. For our example your employee clocked in at 10:00 am and clocked out at 17:00pm.

Step 3: Find the difference

Next you are going to calculate the difference between the start time and the end time. You take the end time and subtract the start time. For your calculations it would look like this: 17:00 - 10:00 = 7:00 So, your employee spent 7 hours at work. But that doesn’t mean all of those hours were work hours. (That'd be just too easy.)

Step 4 - Subtract unpaid breaks

We’re working towards working hours, so we need to subtract any unpaid breaks from time spent at work. If your employee had a 30-minute unpaid break, we’re going to take that out of the hours. 7:00 hours at work - 00:30 unpaid break = 6:30 work hours

Step 5 - Change to decimal format

To make it easy on you at payroll time, now you're going to want to convert the minutes into decimal format. That first number—the hours—stays the same. The second number—the minutes—needs to be converted. All you need to do is divide that second number by 60. For our example, your employee worked 30 minutes, so 30 ÷ 60 = 0.50 So the total hours worked on Monday for your employee is 6.5 hours. Voila! That’s it. You are done calculating the work hours for one of your employees. Of course, we've got an easier way than the above: keep reading to get the goods.

4 simple ways to calculate work hours

Even though this process is relatively easy, you can imagine how much time this takes for every single employee, every single day they worked. You are going to want to make this as easy as possible on yourself. The best way to do that? We’ve got some suggestions.

1. Paper timesheets

Your employees can fill out their own work hours on a handwritten spreadsheet or something like an online Google form. They write down when they arrived, when they took their break, when they left for the day, and if they incurred overtime hours. They can then do the math on their daily hours. Then, they hand you that sheet at the end of the week. The problem? Lots and lots of room for error. You're most likely going to be double-checking every equation anyway.

2. Mechanical time clocks

This's an age-old system where employees punch a physical time card into a mechanical time clock. It automatically punches their start and end times onto the card for records. You would then take those numbers and put them into a payroll program. The problem? It's easy for buddy punching and misplacing of time cards. It also means you are going to have to store all of those time cards for years just in case the FLSA comes looking for records of work hours: you’re gonna need a bigger filing cabinet.

3. Electronic time clocks

The electronic time clock moved the mechanical time clock into the digital age. Instead of punching a time card that can get lost and smudged, the electronic time clock uses a fingerprint or PIN to clock in. This means no more buddy punching and a much smaller filing cabinet. Those electronic punches are kept digitally to pull come payroll time or—knock on wood—if the FLSA comes knocking.

4. Time tracking software

Time tracking software takes the electronic time clock to the next level. Employees can sign in on a computer or a mobile device. Then it takes those numbers and calculates them automatically. Time tracking software makes it easy to have several locations because you don’t need a time clock at each location. As long as your employee has a phone, they're good to go. Geo-location capabilities mean that employees can’t clock in unless they are within a certain range of the work location. The right time tracking software will also be able to send text notifications to employees once they arrive at work, reminding them to clock in. They are often the most flexible and least expensive option for calculating work hours.

Make calculating work hours a breeze with Homebase

Calculating work hours may seem like a daunting task, but it's one of the necessary evils of running a successful business. Now you know that you can use time-tracking tools, you understand overtime rules, and you know the difference between working and non-working hours. You’ve got a leg up. If you want to take your work hour calculations to the next level, consider Homebase for your time tracking software. Not only do we have an easy-to-use time clock, but we’ve thought of everything from automating timesheets to making payroll easy.

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