Comprehensive Guide to Properly Manage Employee Timesheets
Keeping employee time records on paper timesheets has been practiced by business owners and HR personnel for centuries. While more sophisticated methods have been developed over the years, many small businesses still find themselves using paper and pencil. This is not the ideal method, but due to limited resources or limited personnel, this maybe be the best available option. Strict timesheet management is required to ensure that your employees are paid the proper amount, accurate records are kept, and abuse is minimized. Below are some tips and tricks to help when calculating employee time by hand.
Establishing rules for how you will round employee time is critical for every business so that there are standards for everyone to be aware of. The simplest way to round is to the nearest minute. This is the preferred method because it keeps the most exact record possible. However, rounding time to the nearest 5, 10 or 15 minutes makes the math calculations that are required much easier, and helps to eliminate employees watching the clock to and coming in 5 minutes early or leaving 5 minutes late in order to obtain overtime. To round to the nearest 15 minutes, take any time from minutes one to seven and round it back to the quarter hour and minutes eight through fourteen and round up to the nearest quarter hour. A similar process can be for 5 or 10 minute rounding.
Total the Hours
Since the minutes are on a number scale of 60 instead of 100, calculating total work time can be an intense process. The simplest way to perform these calculation is to convert the time from the a.m. p.m. scale to the 24 hour clock or military time. For example if an employee comes to work at 7:30 leaves at 11:57 for lunch, comes back from lunch at 1:03 and goes home at 4:51, you will change the times to 0730, 1157, 1303, and 1651. To calculate this employee’s time for the day you will start at the end of the day and move forward, subtracting the clock ins from the clock outs as follows: 1651-1303+1157-0730=0775. This means the employee worked 7 hours and 75 minutes. Since the minutes are more than 60 subtract 60 from the minutes and add on one hour, which leaves you a total of 8 hours and 15 minutes.
Convert to Decimal Hours
Now that you know the total hours and minutes worked each day, you can add up the daily times to get a total for each week and then the pay period. If you are using a payroll program, it should allow you to input the time in hours and minutes and finish calculating how much each employee should be paid automatically. However, if you are calculating the amount earned by hand, you will need to convert the hours and minutes to decimal hours. For example, if an employee works 6 hours and 30 minutes on a given day, it is pretty intuitive that 6 hour and 30 minutes equals 6 and ½ or 6.5 hours. If an employee makes $10/hour, then multiply 6.5 by $10 to get $65 as the amount they earned that day. That is simple to do in your head but what if there’s a more complicated total such as 37 hours and 41 minutes? Important to note that 37 hours and 41 minutes doesn’t equal 37.41 hours. The proper procedure to covert the minutes to decimal hours is to divide the 41 minutes by 60 which equals .68 and add that to the 37 which equals 37.68 which can then be multiplied by the employee’s hourly rate. Rounding to the nearest 15 simplifies this calculation since the minutes always equal 0, 15, 30 or 45 which convert easily to .0, .25, .5, or.75. This is one of the advantages to rounding to 15 minutes.
Daily Overtime Calculation
If your business offers overtime to its employees, then you will need to take this into consideration when calculating hours. To calculate daily overtime take any days the employee worked more than 8 hours and subtract 8 from the daily total to get the amount of overtime worked each day. Sum the overtime calculated across the whole pay period. That will be your total overtime. Subtract that from the total hours worked to get total regular hours. Then multiply the total regular hours by the employee’s hourly rate and the total overtime hours by 1.5, then by the hourly rate and sum the two totals.
Weekly Overtime Calculation
To calculate weekly overtime you will first need to decide what day of the week your pay period begins on. Then sum the hours from the beginning day of your week to the end of your week. For example if your week begins on a Wednesday you will sum the hours from Wednesday to the next Tuesday. If your business offers overtime after 40 hours then take the total and subtract 40 to get the total overtime hours. Subtract the total overtime from the total hours to get the total regulars. Then multiply the total regular hours by the employee’s hourly rate and the total overtime hours by 1.5, then again by the hourly rate and sum the two totals.
Calculating Weekly and Daily Overtime Simultaneously
Some states, most notably California, require employees to receive overtime on a weekly and daily basis. The easiest way to figure overtime in this situation is to perform the daily and weekly procedures listed above. Then take the higher of the two overtime amounts and award the employee the higher of the two as their total overtime. You can then figure the regular hours as listed above.
Manually calculating and adding up employee times by hand is a time consuming and tedious task. There is automated timesheet software that will perform these calculations in less than a second, at an affordable price for any small business. TimeClick® has been providing small businesses software for over 20 years. Starting at a $99 one-time fee makes TimeClick® a viable option for any business, no matter the size. Automating the management of your timesheets not only saves hours when calculating payroll, but it will keep accurate time records, preventing discrepancies and lowering your overall payroll cost. Demo the software free for 30 days, with no obligation or credit card required and see what you have been missing by manually calculating time.