Why you should calculate average hours worked
There are several reasons why it’s important for you, as an employer, to calculate the average hours worked by your employees. Some help you keep running your business efficiently, while others help you manage your employees fairly while staying compliant with labour laws:
Planning your annual labour budget
Your employees all likely earn different amounts, whether it’s different salaries, different rates of pay, or different hours worked. Some employees also work overtime, which can complicate your labour forecasting. By calculating your employees’ total annual working hours from the start, you can save yourself time and effort when planning your annual labour budget.
You might also need to revisit your labour budget throughout the year to accommodate for shifts in employment levels, especially if your business goes through busy seasons or only operates for part of the year. You can calculate the average hours worked throughout the year to adjust when necessary for these shifts.
Calculating hourly wages
Under Canadian law, you are required to pay your employees at least the minimum wage. This amount can vary by province or territory and, in some cases, across different industries. It is advisable to review Canada’s labour laws periodically to ensure you remain in compliance.
Beyond fulfilling your minimum legal obligations, calculating the average hours worked in a year can also provide a clearer understanding of how much you may pay your employees in accordance with your budget. This can help you avoid overcommitting to pay rates that you cannot feasibly afford.
Creating pay period schedules
Creating pay period schedules is more of a task reserved for accountants or payroll specialists, but you can get a better sense of which pay periods are best for your company. Employees are typically paid weekly, bi-weekly, or bi-monthly. The payment cadence you choose will depend on the nature of your business, specifically how often you receive payment for products or services.
Most payroll and accounting software platforms can help you figure this out and administer proper pay for your employees. You can also choose to hire a dedicated payroll professional to help you figure this out.
Assessing employee work-life balance
If you notice that certain employees are routinely working overtime, it may be a sign that you need to reassess their work-life balance and consider adding staff to ease the workload. While many employees voluntarily work extra hours to increase their income, consistently doing so can lead to extended absences from their friends and family. This can result in burnout, decreased productivity, and a negative impact on company culture.
Beyond adjusting staffing levels, there are various measures you can take to alleviate any work-life imbalance your employees may be facing. Implementing attractive benefits, offering flexible work arrangements, and overhauling company culture to prioritize wellness are just a few examples.
Total work hours in a year
The figure commonly cited for total work hours in a year is 2,080 hours. However, this number overlooks several important factors. For example, some provinces and territories recognize holidays that others do not. Certain Canada-wide statutory holidays are not observed in all regions, and some areas have holidays unique to them. Moreover, this calculation does not account for vacation days, sick leave, any overtime worked, or time taken for personal appointments. Avoid relying solely on this number when formulating workplace policies.
How to calculate work hours per year
Your payroll is likely digitized and your employees’ work hours are centralized and stored in a database. If this isn’t the case, here is how to calculate your work hours per year:
1. Determine standard hours worked each week
If your employees work a consistent shift schedule, this should be an easy task. If not, use averages over a month or more. It can help to demarcate between regular working hours and overtime hours.
2. Multiply by 52
This is fairly straightforward, as there are 52 weeks in a year. If your operations are seasonal—such as landscaping or an amusement park—you should multiply by the total amount of working weeks in your operational year.
3. Calculate paid time off amounts
Your company probably has a paid time off policy, but if it doesn’t, now is the time to implement one. Per employment standards legislation, you are required to give your employees a minimum number of sick days and vacation days. You’ll also need to know whether or not your employees took the time off or whether you need to pay it in lieu.
4. Subtract total time off from annual hours
Finally, subtract your total time off from your annual hours worked to get your total annual working hours.
The risks of not calculating total annual work hours
Maintaining accurate records of your employees’ working hours is important to prevent overworking them and to ensure compliance with labour laws, thereby avoiding potential legal issues. Specific federal and provincial or territorial regulations mandate minimum rest periods between shifts and limit the total number of hours an employee can work within a given week. While there is no exact upper limit on the number of hours a worker may accumulate annually, there are restrictions on the maximum hours permissible within 24 hours.
Calculating the total annual working hours and utilizing these figures to inform company policies is paramount, as doing so helps protect your employees’ wellbeing and keeps your organization compliant.