How To Calculate Hours Worked And Pay Based On Salary

Working hours are a metric that guarantees employees receive payment according to their hard work. Keeping track of the hours your employees work will help you make sure they are compensated fairly.

You can keep tracking and calculating worked hours in different ways. To ensure that all hours worked are properly recorded, select the appropriate timekeeping method and train your team members on how to utilize it.

In this article we will know how to calculate hours worked and pay. Let’s begin!

Why is Payroll Management so Important for Businesses?

Either your employees working in an office or working from home, you should track the payroll perfectly to avoid any miscommunication with the employee.

The impact of payroll on employee morale is one of the most essential parts of payroll. Employees in a small business are more aware of the company’s financial viability than those in a larger one.

They will begin to doubt the company’s financial honesty if payroll is late and start to underperform and care less about their jobs if they believe their jobs are in jeopardy.

To keep employee morale strong, payroll should always keep tracked and be paid on time.

How to Calculate Hourly Rate

You can easily calculate the hourly rate for an employee.

Start with multiplying the hours per week by the number of weeks in a year (52) to get the total number of hours worked . Next, subtract this amount from the annual pay.

If an employee earns $40,000 per year and works 40 hours per week, the hourly rate is $40,000/2,080 (40 x 52) = $19.23.

How to Track the Number of Hours Worked by an Employee

There are tons of ways to track your employees’ working hours. You Can track both digitally and conventally. Let’s talk about conventional ways first.

Conventional Ways to Track Employees Working Hours

Notebook

That’s the most conventional way to track your employees working hours and payroll. You can write down every employee’s name and their time of working. You can also hire someone to do this.

But it’s very time consuming and also expensive as you need to hire another person for the job.

We do several articles about notebooks:

Spreadsheet

Conventional yet effective way to keep track of your employees’ working hours is Spreadsheet software like Microsoft Excel. Also, you can store data in the cloud using Microsoft one drive.

ANother cloud based spreadsheet is Google Sheets. It has both web version and mobile apps. You can even keep track while on the go.

If you don’t have an internet connection it will save the data in your phone or computer (whatever you’re using), once you get online, it starts syncing data to the cloud! Super cool, right?

Digital Ways to Track Employees Working Hours

Let’s discuss some digital ways to keep track of your co-workers’ working hours and easily pay them.

Desktop Software

Employees can clock in and out in a variety of ways with time clock software like Time Doctor, Desktime, HubStuff, Harvest, and others. You can set up a specific self check spot where individuals could submit their time using such an app.

You may build an optimized approach for tracking employee hours by designating distinct spots for employees to register their time.

Downloading an application and providing employees ID numbers or PINs to allow them to clock in or out is often all that is required to set up this type of time clock.

In most cases, these systems also allow administrators to export employees real time data to payroll solutions. It makes much easier to pay employees.

Mobile apps

Mobile apps can measure clock-in and clock-out hours for hourly employees as well as time spent on tasks for salaried or contract workers. Most scheduling software also includes a mobile app.

Employees can use a smartphone app to access a time clock or timer. If your staff work set shifts, the app can remind them to sign in and out or take breaks.

If your staff track time by project or client, they can do so on their mobile device.

Biometric check in

Biometric check in only could be used for on site jobs. It uses biological features like fingerprints or facial traits to authenticate identity.

Using biometrics to clock in helps avoid buddy punching. The real-time system will track an employee’s hours once they enroll in using biometrics.

What is overtime & how to calculate overtime

Overtime is any time worked beyond an employee’s normal working hours. Whereas a generalized overtime simply suggests hours spent outside of the normal working schedule, it is frequently used for conjunction with compensation.

The overtime rate of pay depends on the company and by overtime details. Overtime payment is always 1.5 times of regular payment. SO here is how it’s calculated. Regular hourly rate x 1.5 x overtime hours.

Let me make it clear with an example. If an employees work 45 hours in a workweek at $20 per hour, then their payment will be as below:

Regular pay= $20 x 40 hours = $800

Overtime Payment= $20 x 1.5 x 5 hours = $150

So the total payment for the week is ($800+$150) = $950

How to Calculate PTO?

PTO stands for Paid Time Off. There are some businesses that allow their employees to take paid time off whereas some don’t. It’s important to offer your employees to provide PTO.

It creates more value to your business and makes your employees work harder throughout the year.

Let’s find out how you would calculate the PTO.

1. Calculate your annual hours.

First, you need to calculate the annual hours. For instance, If you give your employees 15 paid vacation days per year. Multiply 15 by working hours of a day (8 hours). So, the annual PTO hours is 120 hours.

2. Divide total annual hours by 12

Add up your hours for each pay month. Divide your annual hours by 12. For example, if you get 15 days off per year, you will have 120 hours of PTO.

Divide the 120 hours by 12 and that comes the result 10. So, Each month your employees accrue 10 hours of PTO.

3. Time worked multiply by pay period PTO

To find out how much time your employees have accrued, multiply the accrued time by the time they’ve worked. Assume your employees worked for 3 months without having any PTO. Then, they have 3 pay periods in three months.

So, simply multiply ten by 3 that will result in 30 PTO hours.

So if your employees want to take a vacation after 3 months, they will get 30 Paid time off hours.

What are the Pros & Cons of Hourly Pay vs Salary?

Pros of hourly pay

Customer service, retail, skilled trades, technical and clerical employment, inside sales, and production are common hourly jobs.Many hourly workers desire to be salaried, although hourly income has more advantages than salaried jobs.

Working forty hours or less each week may help prevent burnout. In one study, excessive workload and overtime accounted for 64% of occurrences of employee burnout.

Moreover, hourly employees who work overtime are generously compensated.

Cons of hourly pay

The main issues with an hourly job is less flexibility and uncertain schedules. Generally, hourly employees are not paid if they are absent from work, making it impossible to take time off for doctor’s visits or family obligations. However, some employers provide sick and personal leave.

Pros of salaried jobs

With salaried jobs, employees know exactly how much they’ll be paid each week. Salaried positions usually pay more and offer greater benefits, retirement plans, vacations, and bonuses.

Salaried workers have more flexibility and can quit work for medical or family reasons.

Cons of salaried jobs

Sadly, salaried employees aren’t always compensated for overtime. So they may work longer hours. Because they work more hours, some salaried employees find they are given less per hour than hourly employees.

The Best Tools To Easily Track Hours Worked & How Much To Pay

1. Desktime

DeskTime is a simplified time tracking program with three key features: staff monitoring, project management, and productivity analysis.

2. Toggl Track

If you need a time monitoring program but don’t want to pay, try Toggl. You will have access to all of the tool’s apps for free, and it offers all the basic features you’d expect from a time monitoring software.

3. Harvest

Harvest is a great time tracking app for small teams. It’s a superb app for single businesses, but it’s also designed to handle a shared workload perfectly.

4. Everhour

Everhour is a simple scheduling app that syncs with other productivity apps. When you link Everhour to a compatible software like Asana, all your Asana projects appear as tasks in Everhour.

Conclusion

Calculating working hours is important for both employers and employees. No employers want to pay more than usual hours and no employees want to get paid less than their worked hours for any errors. To avoid such errors, you have to calculate it well and keep track.

I hope after reading the article you already know how to calculate hours worked and pay. Now it’s time to utilize it in real action!

How to Calculate Hours Worked & Pay Based on Salary