Why you should calculate average hours worked

Knowing the average hours your employees work in a year can inform other decisions and analyses in your organization.

Plan annual labor budget

As an employer, calculating hours worked throughout the year and per paycheck can help you strategize and determine your organization’s labor costs. You can compare it to previous or future years and consider it in relation to revenue, profits and other important financial efficiency factors.

Calculate hourly wages

Breaking down salaried employee wages into an accurate hourly rate can provide valuable insights into your labor costs. For example, comparing the hourly cost of salaried and hourly workers in similar roles can help you glean which compensation method is most cost-effective. You can also use this calculation to determine a fair wage to provide to employees paid on an hourly basis.

Related: The Difference Between Exempt vs. Non-Exempt Employees

Create pay period schedules

Understanding the average hours worked throughout the year can help plan your pay period schedules. For instance, if you know your employees work the standard 2,080 hours in a year without accounting for time off, and you pay employees on a biweekly schedule, then each pay period should represent 80 hours of work.

Assess employee work-life balance

Getting the full picture of your employees’ hours worked and unpaid or paid time off can help you understand if you’re enabling an acceptable work-life balance . If employees work a high average number of hours compared to their pay rate, you may consider providing additional vacation or leave time to improve work-life balance and job satisfaction.

Total work hours in a year

Full-time employees work about 40 hours per week, which breaks down roughly to 8 hours per day for 5 day a week over 52 weeks. That makes a typical work year about 2,080 hours. In other words, 0.000114 represents an hour of a year.

However, other factors, such as weekends, leap years and varying work hours in a month, can affect total work hours in a given year. Year to year, working days can fluctuate by several days.

Months also vary in length from 28 to 31 days, sometimes making determining pay periods, weeks or hours in a month more complicated. You can calculate hours employees work in a month for more precise understanding or stick with the standard 2,080 annual hours if you only need a yearly overview.

How to calculate work hours per year

To calculate work hours per year, follow these steps:

1. Determine standard hours worked each week

The first step is to calculate the average number of hours worked each week. You can collect an average across all full-time employees or calculate averages across departments, roles or other subcategories.

Certain factors may complicate average hours worked each week, such as:

• Part-time employees
• Inconsistent or partial work hours throughout the week
• Overtime
• Meal and rest breaks

For example, if employees work an 8 hour shift but take an unpaid hour for lunch each day, they only work 7 hours per day. That translates to 35 hours per week instead of 40.

2. Multiply by 52

Take the average hours worked in a week and multiply it by 52 weeks. This determines an estimate of how many hours an employee works in a year without accounting for time off or vacations.

For example, employees who work an average of 35 hours per week work about 1,820 hours per year.

3. Calculate paid time off amounts

Next, calculate the amount of paid time off provided to your employees. This includes sick leave, paid vacation time, personal days and other benefits your organization provides. It doesn’t include parental, disability or other types of leave that state and federal governments regulate.

For this calculation, assume your employees take all of their allotted leave benefits and total the number of hours they’re entitled to. For example, if they have 2 weeks of vacation time and 5 days of sick leave, they have a total of 15 paid days off. If they work 8 hours per day, they have 120 paid hours off.

Related: How to Create a Paid Time Off Policy (With Sample)

4. Factor in paid holidays

The federal government recognizes certain public holidays as paid holidays for employees. Private employers aren’t required to give employees days off for these holidays, but many offer paid holidays as an employee benefit.

If your organization gives employees paid holidays off, multiply the number of holidays each year by the average work day. For instance, employees who work 8 hours per day and receive 10 paid holidays per year get an extra 80 hours of paid time off.

5. Add total time off

To determine the total time employees are away from work, add the total number of paid time off to paid holiday hours. Using the previous examples, employees who have 120 paid hours and 80 holiday hours off receive a total of 200 hours off.

6. Subtract total time off from annual hours

Based on the average annual hours without time off calculation from step two, subtract the total paid time off from average annual hours. The formula for this is:

Total hours in a year = (number of hours worked per week x 52) – ((number of days of paid time off + number of paid holidays) x number of hours worked per day)

Example: Based on an average 40-hour work week, 15 paid days off and 10 paid holidays, the total hours an employee works in a year are 1,880.