How to Calculate Hours Worked for Payroll (Step by Step)
Whether you're an hourly employee checking your paycheck or a small business owner running payroll, here's exactly how to convert clock times into accurate, payable hours.
To calculate hours worked: subtract clock-in time from clock-out time, then subtract unpaid break time, then convert minutes to decimal by dividing by 60. For example, 9:00 AM to 5:00 PM with a 30-minute lunch equals 7.5 hours (8 hours minus 0.5 hours break).
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Step-by-Step Calculation
- Record clock-in and clock-out times for each day, in either 12-hour (AM/PM) or 24-hour format
- Subtract start time from end time to get gross hours
- Subtract unpaid break time (e.g., 30-minute lunch)
- Convert minutes to decimal for payroll calculations
Converting Minutes to Decimal Hours
Payroll systems require decimal format, not hours:minutes. The formula is simple: decimal = minutes ÷ 60.
| Minutes | Decimal |
|---|---|
| 15 min | 0.25 |
| 30 min | 0.50 |
| 45 min | 0.75 |
Handling Overnight Shifts
If your clock-out time is numerically earlier than clock-in (e.g., in at 10:00 PM, out at 6:00 AM), add 24 hours (1,440 minutes) to the end time before subtracting, to correctly account for the shift crossing midnight.
Calculating Pay From Hours
Multiply your total decimal hours by your hourly rate. Example: 37.5 decimal hours × $22/hour = $825.00 gross pay for the week, before tax withholding.
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