This post was updated October, 2018
If you don’t have a timekeeping system in place for your business, you are going to need to calculate your workers’ time manually by using their time stamps or punches for hours worked. If you are in charge of processing payroll, there are some general guidelines that will help to set up employee paychecks.
1. Converting Time
Start by rounding every employee time punch to either up or down to the closest quarter-hour. (This means rounding minutes from one through seven down, and minutes eight through fourteen up to the closest quarter of an hour.) After rounding every punch to the closest quarter hour, you can then determine the total time an employee worked each day.
Taking the full amount of time worked each day per employee, you will then want to take those individual rounded times and convert them to decimals. (¼ of an hour would equate to 0.25, ½ of an hour would equal to 0.50, and ¾ of an hour would turn into 0.75). So if an employee worked seven hours and 45 minutes, you would convert that to 7.75 hours.
2. Break Periods
Something to check for in hourly pay calculations is for break periods during shifts worked. This rule will depend on if your company pays for certain breaks or if there is a state law requiring employees to punch in and out for breaks or lunch. It’s important to catch which punches will equal either paid or unpaid time.
In the case that break and/or meal periods are unpaid, subtract only the employees unpaid time (time clocked-out) from their total hours worked which will supply you with their remaining amount of hours to be paid.
3. Calculation and Overtime Exemptions
Every time card calculated will be adjusted based on the work week regardless if your employees are paid weekly, bi-weekly, semi-monthly or otherwise. So during your calculations, consider the hours worked for that week rather than the payroll frequency. Under federal law, an employee must be physically working for over 40 hours of the week to receive overtime pay. Stay on top of your state labor department overtime laws and exemptions to avoid penalties down the line.
Manually calculating time cards is laborious enough, and accounting for overtime, tax filings, and deductions creates even more headaches. It may be time to make the switch to a payroll SaaS platform.
4. Size of Your Company
If your company is small enough, calculating time manually may be the more inexpensive route to go, but keep in mind there is a large margin for error when adding up every hour line by line. If your company uses stamps for clocking in and out, you will find, on more than one occasion, that not all punches come out clearly making it extremely difficult to read and collect the right times.
Not only can reading the time punches be difficult, but it can also be extremely time consuming depending on how many employees you are calculating for. As your business grows, it may be time to consider an alternative approach to calculating time cards. A cloud-based timekeeping system will collect hours from a timeclock; hours will flow directly into payroll. A single-source solution would eliminate dual entry between platforms that ensure accurate paid wages every time.
For more information on Dominion’s Time & Attendance feature, check out our info page below.
Chron.com - Small Business