As a small business owner, you probably employ one or two people to aid in the operations of your business. Instead of investing in a point-of-sale system, you ask each employee to track their hours on a physical paper timesheet or digital timesheet. Once your employee(s) turns in their timesheet, you will calculate their pay, taxes, and other deductibles to determine their final pay. This is how to calculate a timesheet manually by hand.
How to Calculate a Timesheet by Hand
You’ll need to take some basic steps when completing your calculations by hand. These include:
Step 1: Employees Clock In and Out
You can have your employees clock in and out using the 24-hour clock, also known as military time, to make calculations easier. If Joe started work at 8:15 a.m., this becomes 08:15. If he finished at 5:45 p.m., he would write it as 17:45.
If you require employees to clock out for lunches, you must remember that each day will have two time records. For example, Joe started work at 8:15, clocked out for lunch at 13:15, then back in at 13:45, then clocked out of work for the day at 17:45
Step 2: Calculate Daily Hours Worked
Calculate the actual working hours by subtracting the start time from the finish time. If Joe started working at 08:15 and stopped at 17:45, he worked 9 and 1/2 hours that day.
Step 3: Transfer Minutes into Decimal Format
Change time worked to decimals. For example:
- ¼ hour = 0.25
- ¾ hour = 0.75
There are two ways to pay an employee for minutes worked:
- The easy way is to round minutes up. If Sarah worked 6 hours and 38 minutes, you would round up her time to 6 hours and 40 minutes, or 6.67 hours worked.
- The more complicated way is to keep minutes the same. If Sarah worked 6 hours and 38 minutes, she would be paid for 6.63 hours worked.
Step 4: Add Total Hours Worked for Pay Period
Add the total hours worked for the pay period, which can be submitted weekly, biweekly, monthly, or by the project. Then multiply the total number of hours worked by the employee pay rate. If overtime is paid at a higher rate, you need to calculate that time correctly.
For example, Noah receives payment every two weeks; he worked a total of 80.75 hours, with .75 of it being overtime. To calculate Noah’s pay, you would calculate it as follows:
Regular Hours: 80 hours x $20/hour = $1600
Overtime Hours: .75 hours x $25/hour = $18.75
$1600 + $18.75 = $1,618.75 (before any deductions)
Keep in Mind
- When you calculate employee pay, you need to take into account if there are mandatory and voluntary deductions or special compensations such as bonuses and commissions. These items will need to be carefully removed from the employee’s gross pay.
- Make sure you keep track of employee pay rates and their overtime rates. While some businesses may pay the same, supervisors, for example, may receive a higher pay rate. This information is vital to know when calculating pay.
- You’ll also need to comply with all local, state, and federal laws to avoid unnecessary penalties and fines when calculating timesheets and creating paychecks. The Fair Labor Standards Act (FLSA) sets out the rules you’ll have to follow. One of the most important rules is keeping timesheet records for two years.
What to Include on a Timesheet
Timesheets have traditionally been used to pay individual employees and contractors. Many people are doing project-based work, and timesheets are an important tool for this type of employment. Regardless, all timesheets should include:
- The employer’s name
- The employee’s full legal name
- The pay period
- This can pertain to daily, weekly, or monthly payments
- The pay period can also be based on a project timeline
- Indicate the start and finish date of the correct payment period
- Project and task details
- Group tasks by their project; it’s then easy to see what someone was working on and can be shown to clients as proof of billable hours
- The daily and weekly hours worked
- Fill in the columns with the hours worked each day, then add up the working hours for the week
- Include any overtime hours on the appropriate day
- Total workweek hours
- Pay rate
- Extra notes
- Reasons why you worked overtime
- Explain absences
- Submit for approval and payment
Reasons to Calculate a Timesheet by Hand
You may have decided to calculate a timesheet by hand for many reasons, the most common include:
- It’s Economical: Instead of purchasing a fancy program or machine to calculate employee time in and out, you can save money with a pen and paper.
- It’s Easy: You don’t need computer skills or a specialist to decipher complex digital records.
- You’re a Small Business: A small mom-and-pop restaurant with few employees, for example, can easily do all their timesheet calculations by hand.
- It’s Direct: You don’t need to report your employee time to a larger corporate system or outsource your payroll; doing it yourself makes more sense.
- You Need to Crosscheck Data: You may question what your computer has calculated, and you need to double-check a timesheet.
Getting Your Staff to Complete Accurate Timesheets
Even in a small company, you can’t track how each staff member spends their time. You will have to rely on your employees to fill in their timesheets accurately. There are often problems with this, as some of your staff may forget or find “better” things to do. Here are some actions that you can take to make sure that the timesheet process runs smoothly:
- Keep your timesheets as simple as possible
- Filling them in will be a quick, routine task rather than a burdensome chore if they are easy to complete.
- Explain to your staff why accurate timesheets are important to the company and to receive an on-time paycheck
- Train your staff so that they know how to fill their timesheet in, add notes, and account for lunches and breaks
- Have timesheets available in alternative languages for all non-English speakers
- Be clear about when and where you want the timesheets handed in
- Establish a routine that clarifies deadlines and where your staff should leave their timesheets at the close of a pay period.
- If you notice that certain employees have consistent problems with their timesheets, chat with them privately.
- Assume that incorrect timesheets are errors, not deliberate attempts to mislead. You will soon notice if someone is cheating. But don’t assume that a mistake is anything other than simply that.
The Downside of Manually Calculating Timesheets
There are, of course, downsides to relying only on manual, handwritten timecards.
- It’s time-consuming
- It’s easier for workers to tweak their hours by adding time they didn’t work and committing “time theft”
- Consider the physical storage space you’ll need and the possibility of the paperwork being lost or damaged
- Human error is also a factor when calculating timesheets by hand
- Employees will forget to clock in and out
- Employees have poor handwriting
Digitally Calculating Timesheets
Many firms, big and small, choose to digitally calculate timesheets using tools like Excel or Google Time Sheets.
Advantages of Using a Digital Timesheet
Digital Timesheets are User-Friendly
Your employees will log in their start and finish times for each working day; if employees aren’t paid for lunches and breaks, they might need to be reminded to deduct these periods. Many digital timesheets are accessible anytime/anywhere, making remote working possible. Additionally, all the data is securely stored as long as the related account is active.
Digital Timesheets are Free
Programs like Excel and Google Time Sheets are free when included in their respective applications. (Microsoft will require a paid subscription, and Google requires a registered account, but it is free). Both digital timesheets allow for automatic calculations, reducing the need to do mental math. Digital timesheets also reduce the cost of paper timesheets, as the digital footprint is kept, not physical records.
Disadvantages of Using a Digital Timesheet
Like any program, there will be issues when using digital timesheets. Employees may forget to log in and out when they work, they may forget to forward their timesheet to you at the end of the pay period, or they may compromise your security when using a digital timesheet. Additionally, paying for a Microsoft account to use Excel can become costly if all the other tools are not being used.
As we have seen, there are advantages to filling out timesheets by hand. In many cases, you will need your employees to do most of the work. So it is crucial to have a clear system in place so that all employees understand the process and importance of doing so.
Your timesheets are useful information that may help you allocate time more effectively and understand how your employees spend their time per project. It is also vital to get timesheets correct as payments are being made to employees; this is important not only for the employee but also for the business. Be patient when calculating timesheets by hand.