Employee payroll absolutely must be accurate or an employer may be at risk of lawsuits and other legal consequences. Unfortunately, it can sometimes be challenging to convert hours and minutes into decimals to calculate payroll earnings. While employers can calculate earnings a few different ways, they must always make sure these calculations are accurate.
Turning Minutes Into Decimals
The most accurate way to calculate the length of time a person worked is to first convert minutes into decimals. This is done by dividing the minutes worked by 60, so 22 minutes becomes .37 of an hour. If you are doing payroll by hand, you might find it easier to use a time conversion chart that lists each minute of an hour and its exact fraction of an hour.
The Quarter-of-an-Hour Method
Alternatively, if you have a hard time dealing with exact decimal places, you can round minutes to quarter-of-an-hour intervals. This way, you only have to deal with turning 15, 30 or 45 minutes into .25, .50 or .75. If you choose to round minutes to quarter hours though, you must be fair in rounding up or down, or risk violating the Fair Labor Standards Act.
Calculating Hours Worked
The easiest way to calculate the total hours someone works is to use 24-hour military time, rather than the usual a.m./p.m. system most people use. By using a 24-hour clock, you can subtract the time an employee arrived from the time they left work. For example, if Carol clocked in at 8:03 a.m. and clocked out at 4:34 p.m., based on a 24-hour clock, this would be 8:03 and 16:34, respectively. Once you convert the minutes to decimals (in this case, .05 and .57), you can subtract her time in (8.05) from her time out (16.57), which leaves you with a total of 8.52 or 8 hours and 31 minutes.
Using a Spreadsheet
While some employers like to do things by hand, spreadsheets can be particularly helpful for calculating the amount of time an employee works. They can be programmed to automatically convert 12-hour time to 24-hour time complete with decimal places. If you aren't good with spreadsheet equations, you can even buy spreadsheets pre-programmed to calculate payroll hours that will also automatically multiply hours worked by an employee's pay rate.
A payroll software program is an excellent alternative to calculating payroll yourself. Payroll software doesn't just make it easier to figure out how many hours an employee worked; it can also make it easier to estimate overtime, employee bonuses, garnishments and W-2s. If cost is a concern, you can find free and inexpensive payroll software online.