How to calculate hours worked (and why it matters)

How to calculate hours worked

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Whether you're running a small business, managing a growing team, or just trying to stay on top of your own work hours, tracking time accurately can feel like a full-time job in and of itself. Between lunch breaks, overtime, and multiple projects, knowing exactly how many hours someone has worked isn't always as straightforward as it seems. 

But with the right HR software in place, time-tracking doesn't have to be a massive headache. 

 

The basics of time-tracking 

Let's start with the essentials, shall we? Defining hours worked, understanding how to calculate them, developing an awareness of the tools at your disposal, and staying up-to-date with legal considerations are all keys to getting it right. 

What exactly counts as "hours worked"?  

In the majority of cases, hours worked include any or all of the following: 

• Clock-in to clock-out time 
• Short breaks (typically paid) 
• Time spent actively working on projects or tasks 
• Overtime, depending on jurisdiction 

It's worth noting that unpaid meal breaks (usually at least 30 minutes) are often not counted as hours worked. However, this can vary depending on your location, so it's always important to check local labor laws and employment standards. 

How to calculate hours worked? 

On the most basic level, calculating hours worked means subtracting an employee's start time from their end time and deducting any unpaid breaks.  

For instance, if an employee starts at 9 AM and ends at 5 PM, with one unpaid lunch break of 30 minutes, their total hours worked is 7.5 hours.  

Of course, things are rarely that simple. When you start to factor in staggered shifts, overtime, project-specific work, and remote employees, it's easy to see how manual tracking can lead to all sorts of errors and confusion. 

This is where PurelyHR's Time-Clock and Timesheet modules can help streamline the process and make life a whole lot more pleasant. 

PS: Don't overlook legal considerations 

Tracking hours worked isn't just about keeping clean records—it's also about staying compliant with employment regulations. Whether you're managing part-time or full-time staff, you'll need to account for overtime rules, break entitlements, public holidays, payroll record-keeping, and lots more. 

Staying on top of all of this manually is extremely time-consuming, and errors can lead to payroll issues or even legal complications. That's why small business owners increasingly turn to time-tracking software that can automatically apply these rules and help to reduce risk. 

 

Methods for calculating hours worked. 

While it's true that some teams still rely on spreadsheets, paper timesheets, or traditional punch cards, these methods can lead to miscalculations, time theft, or disputes—to name just a few. Plus, they eat up oh-so-valuable time during payroll processing. 

The good news is that automated HR software can dramatically improve the accuracy and transparency of time-tracking for employers and employees alike.  

With the help of automated tracking tools, employees can clock in and out digitally from any device while time entries are automatically calculated and securely stored. Managers gain the ability to track attendance in real-time, and IP restrictions help ensure team members are clocking in from the correct location—cultivating trust and eliminating guesswork. 

Automation doesn't just help prevent errors—it also simplifies workflows, improves data accuracy, and supports a more positive employee experience overall. 

PurelyHR's Time Clock offers the following key features: 

• Seamless clock in/out functionality 
• Automatic creation of timecards for payroll 
• Inbuilt overtime tracking system 
• IP-based restrictions to reduce location-based errors 
• Visibility into who's working—ideal for hybrid and remote teams 

In a nutshell, it's an ultra reliable, cloud-based tool that helps track employee attendance and work hours without the need for clunky hardware or confusing spreadsheets. 

Tracking time spent on projects 

When employees work across multiple projects, clients, or departments, it's not just about how many hours they worked—it's about what those hours were spent on. 

Tracking the time your staff spends on specific projects helps businesses understand where employee time is going, improve productivity and efficiency, bill clients accurately for work completed, and report time usage to funders. All of these fulfill critical needs for nonprofits or any organization relying on grant-based work. In other words, wise and precise time allocation supports everything from HR management to revenue growth and long-term visioning! 

PurelyHR's Timesheet module offers an intuitive solution for logging time on specific projects:  

• Seamless hour tracking by project, client, or task 
• Easy review and approval of timesheets by managers 
• Clear visibility into project progress, time allocation, and costs 
• Accurate generation of detailed reports for billing or grant reporting 

Whether you're a creative agency billing by the hour or a nonprofit required to log hours for grant compliance, this module offers flexible functionality designed to mold your workflow. 

Best practices for project-based tracking 

Want to get the most value from your timesheet system? Consider the following best practices: 

• Encourage employees to track hours daily rather than weekly to ensure accuracy while tasks are still fresh in their minds. 
• Create consistent project codes or naming conventions so time entries stay organized and easy to analyze. 
• Review time data regularly to identify inefficiencies, overwork, or misaligned priorities that may be compromising productivity. 
• Build a culture of transparency over micromanagement to foster trust and encourage honest, consistent time tracking. 

Organizations that take time-tracking seriously often uncover surprising insights into how work actually gets done. 

Common use cases of the Time-Clock and Timesheet modules 

To get the most out of PurelyHR's time-tracking tools, it helps to know when to use each one. 

Time-Clock  

The Time Clock module is used to track employee working hours for payroll, monitor who is in or out of the office in real time, and manage overtime with minimal manual input. It replaces traditional hardware punch-in systems with a streamlined, digital system accessible from any device. Businesses rely on it to ensure attendance accuracy, enforce location-based clock-ins through IP restrictions, and simplify compliance with applicable labor regulations. It's an essential tool for teams that need a simple and reliable way to stay on top of daily staffing needs. 

For instance, a retail business with multiple locations can use Time-Clock to see which employees have clocked in at each site and manage shift coverage accordingly, all from one centralized dashboard. 

Timesheet   

The Timesheet module is commonly used to generate timesheets for payroll and to track time spent on specific projects, clients, or tasks. It's especially valuable for businesses that need to bill clients based on hours worked, allocate internal resources effectively, or document time spent on grant-funded activities—particularly relevant for nonprofits. It also allows for easy manager review and approval, making it a go-to solution for tracking project budgets, monitoring productivity, and meeting reporting requirements with precision and ease. 

For example, a nonprofit organization can use a Timesheet to log employee hours spent on community outreach programs funded by a government grant, ensuring accurate reporting and continued funding. 

Accurately calculating hours worked is a cornerstone of effective HR management. It ensures fair pay, promotes transparency, supports compliance, and helps your entire team stay on track. 

With powerful time-tracking and calculator tools like Time Clock and Timesheet, it's never been simpler to track hours, manage projects, and build a more productive team. 

If you're ready to simplify time-tracking and elevate your HR game, try PurelyHR for size with a free 21-day trial or book a demo today.