How to Count Payroll Hours
Hourly employees are paid based on hours worked; therefore, counting the relevant hours appropriately is key to ensuring accurate paychecks. Hourly employees generally use a timekeeping system, such as a time clock or time sheets, and the payroll person counts the hours based on the time card/time sheet data. In certain instances, you may have to count payroll hours for salaried workers.
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Instructions
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Count regular hours and pay them at the employee’s regular pay rate. Regular hours are hours worked up 40 for the workweek. Suppose the employee starts work at 8 a.m., takes lunch between 1 p.m. and 2 p.m., and leaves at 5 p.m., Monday to Friday. He doesn’t get paid for the lunch period; therefore, subtract one hour for each day. This leaves him with eight hours worked each day.
Calculation: 8 hours x 5 days = 40 regular hours.
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Tally overtime hours and pay them at the employee’s overtime pay rate of one and one-half, or 1.5, times her regular pay rate. For example, the overtime rate for $10 per hour is $15 per hour, or $10 per hour times 1.5. If the employee works more than 40 hours for the week, pay the excess hours at her overtime rate. Suppose she starts work at 7 a.m., takes lunch between 11 a.m. and 11:30 a.m., and leaves at 4 p.m., Monday to Saturday. Subtract 30 minutes for unpaid lunch each day. This leaves her with 8½ hours worked each day.
Calculation: 8.50 hours x 6 days = 51 hours.
Pay 40 hours at regular time and 11 hours at her overtime rate.
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Determine other hours, such as benefit hours and double-time hours. Federal law does not require the employer to give these hours; it is a matter between the employer and the worker, according to the U.S. Department of Labor. Benefit hours include vacation, personal and sick time. These hours are normally paid at the employee’s regular pay rate. If the employer pays double-time for hours worked on holidays or on the employee’s scheduled day off, it pays it at twice the employee’s normal pay rate. For example, $10 per hour, regular pay rate, equals $20 per hour, double-time pay rate.
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Do not count payroll hours for salaried workers. These employees are normally paid a fixed wage each pay period and are paid their full salary regardless of hours worked. A few exceptions may apply, such as unpaid suspension and deduction for overuse of benefit days. In such cases, make the deduction in full-day increments based on the employee’s hourly or daily pay.
Hourly example: $53,000 / 52 weekly pay periods / 5 days / 8 hours = $25.48/hour.
Daily example: $53,000 / 52 weekly pay periods / 5 days = $203.85/day.
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Tips & Warnings
You may round the employee’s time up and down to the nearest five minutes, or to the closest one-tenth or quarter-hour.
Do not make a habit of rounding down when you should be rounding up. This practice will cause you to short the employee’s pay, which can result in penalties from the Department of Labor.
References
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