Time & Payroll Glossary

All time for which an employer is legally required to pay an employee under the Fair Labor Standards Act (FLSA) or applicable state law. Compensable time includes hours worked, certain on-call periods, required training, and travel between job sites during the workday. Accurately identifying compensable time is critical because it determines the decimal hours used for payroll calculations. Time that doesn't qualify, like a genuine meal break where the employee is fully relieved of duties, is excluded from the decimal hour total.

Example: An employee spends 20 minutes at the end of their shift required to clean equipment. These 0.33 decimal hours are compensable time that must be recorded and paid, even though the employee's scheduled shift already ended.

Time written as a single number instead of hours and minutes. So 30 minutes becomes 0.5, 45 minutes becomes 0.75, and 8 hours 45 minutes becomes 8.75. The reason this matters: you can't multiply "8:45" by a dollar rate, but you can multiply 8.75. The conversion formula is hours + (minutes ÷ 60). The free calculator here handles any HH:MM input automatically.

Example: An employee works 8 hours and 45 minutes. That's 8.75 decimal hours. At $20/hr, gross pay is exactly $175.00. Try multiplying $20 by "8:45" and see what you get.

The conventional way of writing time using hours, minutes, and optionally seconds, separated by colons. HH represents hours (00–23 in 24-hour format or 1–12 in 12-hour), MM represents minutes (00–59), and SS represents seconds (00–59). While familiar and human-readable, this format can't be directly used in multiplication, it must be converted to decimal hours first for any payroll math to work correctly.

Example: A shift logged as 07:45 means 7 hours and 45 minutes. To use in payroll, convert to 7.75 decimal hours. If you tried to multiply 7.45 × $18, you'd get the wrong answer.

A timekeeping system that runs from 00:00 (midnight) to 23:59 (one minute before midnight), eliminating the AM/PM ambiguity of the 12-hour clock. Military time is not decimal time, it still uses minutes and hours in the sexagesimal system. Commonly used in healthcare, the military, aviation, and international business. Converting military time to decimal hours uses the same formula as standard HH:MM: hours + (minutes ÷ 60).

Example: 14:30 in military time equals 2:30 PM. In decimal hours, both equal 14.5 (or 2.5 if counting from midnight on a standard shift basis).

The fixed chunk of time for which wages are calculated and paid. Weekly means 52 paychecks a year. Biweekly means 26. Semi-monthly is 24, usually on the 1st and 15th. Monthly is 12. The thing that trips people up: the pay period and the FLSA workweek aren't the same thing. Even on a biweekly schedule, each 7-day workweek inside that period gets its own overtime calculation. You don't average the hours across two weeks.

Example: A biweekly pay period runs from Monday the 1st through Sunday the 14th. All decimal hours worked during those 14 days are summed, but overtime is still calculated week by week within that period, not across all 14 days combined.

Adjusting clock-in and clock-out times to the nearest set increment instead of tracking exact minutes. Common increments are 5, 6, 15, or 30 minutes. The FLSA allows this, but with a catch: the rounding has to be neutral over time. If it consistently rounds down for employees and rounds up for the employer, that's a violation of 29 CFR § 785.48. California takes an even harder line. When in doubt, record exact times.

Example: Under 15-minute rounding, an employee who clocks in at 8:07 AM has their start time rounded to 8:00 AM. An employee clocking in at 8:08 AM is rounded to 8:15 AM. Both adjustments show up in the decimal hour total for the day.

The base-60 number system used for measuring time and angles, inherited from ancient Babylonian mathematics. Our system of 60 minutes per hour and 60 seconds per minute is sexagesimal. This base-60 structure is why time can't be added or multiplied like ordinary decimal numbers without conversion first, the minutes column resets at 60, not 100.

Example: When you add 7 hours 45 minutes to 3 hours 30 minutes, you get 11 hours 15 minutes, not 11.75, because the minutes reset at 60. In decimal hours, 7.75 + 3.5 = 11.25. That's the correct answer for payroll purposes.

A record of the hours worked by an employee or contractor during a defined period, used to calculate pay, track project costs, or document billable hours. Timesheets may record daily clock-in and clock-out times, total hours per day, or cumulative weekly totals. Modern timesheets typically display time in both HH:MM and decimal formats to accommodate different payroll and billing systems.

Example: A weekly timesheet shows Mon 8:30, Tue 7:45, Wed 8:15, Thu 9:00, Fri 8:00. In decimal hours: 8.5 + 7.75 + 8.25 + 9.0 + 8.0 = 41.5 hours for the week, meaning 1.5 hours of overtime kicked in.

A device or software system that records the exact time employees begin and end their work shifts. Traditional mechanical time clocks punched paper cards; modern systems use biometric scanners, PIN entry, mobile apps, or web browsers. Most digital time clock systems automatically convert clock-in/clock-out records to decimal hours for payroll export, which removes the manual conversion step entirely.

Example: An employee clocks in at 8:12 AM and out at 5:27 PM. The time clock system records 9 hours 15 minutes and automatically exports 9.25 decimal hours to the payroll platform.

The primary international time standard by which the world's clocks and time zones are regulated. UTC replaced Greenwich Mean Time (GMT) as the global standard in 1972. Relevant to time tracking for organizations with employees across multiple time zones, remote teams and international companies often log time in UTC to maintain consistent records before converting to local time zones for payroll processing.

Example: A distributed team member in London (UTC+0) logs 9:00–17:00 UTC. A colleague in New York (UTC-5) logs the same shift as 4:00–12:00 local time, both representing the same 8.0 decimal hours worked.

A payroll accrual is the amount of wages and benefits employees have earned but not yet been paid, most often because the pay period spans a month-end accounting date. Accruals are recorded as a liability on the company's balance sheet. For hourly employees, the accrual calculation depends directly on accurate decimal hour records: hours worked since the last paycheck multiplied by the hourly rate (plus applicable overtime) gives the accrued liability.

Example: A pay period runs the 1st–14th, but financial statements are prepared on the 12th. Employees have worked 10 decimal hours each over two days. At $22/hr, the company accrues $220 per employee as a payroll liability on the books.

The fixed compensation an employee receives for performing their regular job duties, not including overtime, bonuses, shift differentials, or other supplemental pay. For hourly workers, base pay equals the hourly rate multiplied by regular (non-overtime) decimal hours worked. For salaried workers, base pay is the agreed annual or periodic salary. Base pay forms the foundation from which gross pay is calculated.

Example: An employee earning $19/hr works 38.5 regular decimal hours in a week. Their base pay for that week is $19 × 38.5 = $731.50, before any deductions or bonuses.

Amounts subtracted from an employee's gross pay before the final net pay amount is issued. Deductions fall into two categories: pre-tax deductions (like 401(k) contributions and health insurance premiums, which reduce taxable income) and post-tax deductions (like Roth contributions and wage garnishments, which don't). The accuracy of gross pay, which depends on correctly converted decimal hours, directly affects the dollar amounts of percentage-based deductions like retirement contributions.

Example: An employee's gross pay is $1,200. Pre-tax deductions: $96 (8% 401k) + $85 (health insurance) = $181. Taxable income becomes $1,019, from which federal and state taxes are then withheld.

An electronic transfer of net pay directly into an employee's bank account on payday, rather than issuing a physical check. Direct deposit uses the ACH (Automated Clearing House) network and is initiated by the employer's payroll system one or two business days before the pay date. It's by far the most common payment method in the US and requires accurate decimal hour calculation to ensure the correct net pay amount is transmitted.

Example: Payday is Friday. The employer submits the payroll file, containing each employee's net pay calculated from their decimal hours and deductions, to their bank by Wednesday so funds arrive on time.

Pay at exactly twice the employee's regular hourly rate. The FLSA doesn't mandate double time, but it's required in some states (notably California for hours over 12 in a single workday and all hours on the 7th consecutive workday), and many employers offer it voluntarily for holidays or extreme overtime situations. Like all pay calculations, double time is computed by multiplying the applicable decimal hours by 2× the regular rate.

Example: A California employee works 14 hours in a day at $20/hr. The first 8 hours = regular pay ($160), hours 8–12 = time-and-a-half ($30 × 4 = $120), and hours 12–14 = double time ($40 × 2 = $80). Total: $360 for that day.

A court-ordered or government-mandated deduction from an employee's wages, typically to satisfy a legal obligation like unpaid child support, student loans, back taxes, or a creditor judgment. Employers are legally required to comply with garnishment orders and must calculate the deduction correctly from the employee's net or disposable pay. Federal law (Consumer Credit Protection Act) limits how much of a paycheck can be garnished.

Example: An employee receives a child support garnishment order for $350 per biweekly pay period. The employer deducts $350 from net pay and remits it directly to the state disbursement unit, regardless of the employee's instructions.

What you earned before anything gets taken out. For hourly workers, it's total decimal hours multiplied by the hourly rate, with overtime hours counted at 1.5x. Every deduction on a pay stub, every tax calculation, all of it starts here. Get the decimal hours wrong and everything downstream is wrong too. An error of 0.25 hours at $20/hr is $5 per person, and that adds up fast across a team.

Example: An employee works 42.5 decimal hours at $18/hr. Gross pay = (40 × $18) + (2.5 × $27) = $720 + $67.50 = $787.50. All deductions come out of this number.

The amount of money an employee earns for each decimal hour worked. Hourly rates vary by role, experience, location, and industry. The hourly rate is the direct multiplier in gross pay calculations: decimal hours × hourly rate = base gross pay. For overtime, the hourly rate is multiplied by 1.5 for time-and-a-half or 2.0 for double time.

Example: An employee earns $23.50/hr and works 37.25 decimal hours in a week (no overtime). Their gross pay is $23.50 × 37.25 = $875.38.

The lowest hourly rate an employer may legally pay a non-exempt employee. The federal minimum wage is set by the FLSA, but many states and cities have higher minimums that employers must use when they exceed the federal floor. Tipped employees may be paid a lower cash wage if tips bring them to the full minimum. Employers must apply the higher of the federal, state, or local minimum rate to every decimal hour worked.

Example: As of 2026, the federal minimum wage is $7.25/hr, but Washington State's minimum is $17.13/hr. An employer in Seattle must pay at least $17.13 for every decimal hour worked, the higher state rate always prevails over the federal floor.

What actually hits your bank account. It's gross pay minus everything: federal and state income tax, FICA, health insurance, retirement contributions, and any garnishments. For most hourly workers, net pay lands somewhere between 65-75% of gross. Because net pay flows directly from gross pay, a wrong time entry at the top of the calculation affects the number at the very bottom.

Example: An employee's gross pay is $1,050. After federal income tax ($126), FICA ($80.33), state tax ($42), and health insurance ($85), net pay is $716.67, roughly 68% of gross in this scenario.

When a non-exempt employee works more than 40 hours in a workweek, every extra hour gets paid at 1.5 times their regular rate. That's federal law under the FLSA, and it's calculated by workweek, not by pay period. So a biweekly paycheck contains two separate overtime calculations. Decimal hours make this easy: subtract 40 from total weekly hours, multiply the remainder by 1.5x the hourly rate. See the full overtime calculation guide.

Example: An employee works 44.75 decimal hours at $16/hr. Regular pay: 40 × $16 = $640. Overtime pay: 4.75 × $24 = $114. Total gross pay: $754. Without decimal conversion, calculating 4 hours 45 minutes of overtime would require a manual conversion step.

A document provided with each paycheck (paper or electronic) that details an employee's earnings, deductions, and net pay for a specific pay period, along with year-to-date totals. Most pay stubs show hours worked in decimal format alongside gross pay, itemized deductions, and the resulting net pay amount. Many states legally require employers to provide a pay stub with each payment, and the information must be accurate.

Example: A pay stub shows: Regular hours 40.0 @ $19.50 = $780.00; OT hours 3.5 @ $29.25 = $102.38; Gross $882.38; Federal tax -$105.89; FICA -$67.50; Net pay $709.00.

A full payroll report listing every employee paid during a pay period, along with their earnings, deductions, and tax withholdings. It's the master record of a payroll run, used for reconciliation, auditing, and tax filing. Payroll registers typically include each employee's decimal hours worked, regular and overtime pay, all deduction categories, and net pay, making it a critical document for both internal finance teams and external auditors.

Example: The payroll register for the first biweekly period of the year might show 45 employees, total gross wages of $68,400, total FICA employer contribution of $5,232.60, and total net pay distributed of $52,100.

Compensation for hours worked at the employee's standard hourly rate, not including overtime premium pay. For a typical hourly employee, regular pay covers up to 40 decimal hours per workweek. The FLSA's "regular rate of pay" is a specific legal concept that may include certain bonuses and additional compensation when calculating the overtime premium rate, not just the base hourly rate.

Example: An employee works 43 decimal hours at $21/hr. Regular pay covers 40 hours × $21 = $840. The remaining 3 hours generate overtime pay separately at $31.50/hr, not additional "regular" pay.

Wages owed to an employee for work already performed that were underpaid due to a payroll error, a delayed raise, or a renegotiated contract. Retro pay fills the gap between what was paid and what should have been paid. Calculating retro pay often requires going back through historical timesheet records and recalculating gross pay using the corrected rate or corrected decimal hours for each affected pay period.

Example: An employee's raise from $18 to $20/hr was supposed to start on the 1st but wasn't applied until the 15th. They worked 80 decimal hours in that two-week gap. Retro pay = 80 × $2 = $160 owed.

A fixed amount of compensation paid on a regular schedule regardless of hours worked, typically expressed as an annual figure. Salaried employees (usually classified as exempt from overtime) receive the same paycheck whether they work 38 hours or 50 hours in a week. However, salaried non-exempt employees do exist, they receive a fixed weekly salary but are still entitled to overtime pay for hours over 40. Time tracking for salaried exempt employees is often optional, but many employers still require it for project costing.

Example: An employee earns $58,500/year on a semi-monthly pay schedule. Each paycheck = $58,500 ÷ 24 = $2,437.50 before deductions, regardless of how many decimal hours they logged that period.

Pay at 1.5 times an employee's regular hourly rate, the minimum overtime premium required by the FLSA for non-exempt employees working more than 40 hours in a workweek. "Time" refers to regular pay and "a half" refers to the 50% premium added on top. To calculate: multiply overtime decimal hours by (regular rate × 1.5). This is one of the most common calculations performed with decimal hours.

Example: An employee earns $18/hr. Time-and-a-half rate = $18 × 1.5 = $27/hr. They work 6.25 overtime hours. OT pay = 6.25 × $27 = $168.75. Add to 40 hours of regular pay ($720) for a gross total of $888.75.

The portion of an employee's wages that an employer holds back from each paycheck and remits directly to the government on the employee's behalf, to cover federal and state income taxes plus FICA contributions. Withholding amounts are determined by the employee's W-4 elections and the applicable tax tables. Because withholding is calculated as a percentage of taxable gross pay, it depends entirely on having the correct decimal hour totals in the first place.

Example: An employee's taxable gross pay for the period is $1,600. Based on their W-4 and the IRS withholding tables, $192 in federal income tax and $122.40 in FICA are withheld and sent to the government before the employee sees a cent.

The cumulative running total of any payroll figure, gross pay, taxes withheld, deductions, net pay, from January 1 through the current pay date. YTD figures appear on every pay stub and are used to verify that Social Security taxes are correctly capped when an employee hits the annual wage base limit ($184,500 for 2026), and to reconcile against W-2 totals at year-end.

Example: By June 15th, an employee's YTD gross pay is $41,200. Their YTD Social Security tax withheld is $2,554.40 (6.2% × $41,200). These YTD figures will appear on their mid-year pay stub and ultimately match Box 1 and Box 4 of their W-2.

A unique nine-digit number assigned by the IRS to identify a business entity for federal tax purposes, essentially a Social Security number for a company. Any business with employees must have an EIN to file payroll tax returns and issue W-2s. The EIN appears on all federal tax filings, including Form 941, Form 940, and all W-2s issued to employees.

Example: A small bakery hires its first employee. Before running payroll, the owner applies for an EIN at IRS.gov (free, takes minutes) and receives a number like 45-1234567, which appears on all subsequent payroll tax filings.

A critical FLSA distinction that determines whether an employee is entitled to overtime pay. Non-exempt employees must receive time-and-a-half for hours over 40 per workweek, their decimal hours must be tracked carefully because overtime pay depends directly on that record. Exempt employees are generally salaried, earn above the salary threshold (currently $684/week as of 2026, after the DOL's proposed increase to $1,128/week was struck down by a federal court in November 2024, reverting to the 2019 level), and perform executive, administrative, or professional duties; they aren't entitled to overtime regardless of hours worked. Most hourly workers are non-exempt by default.

Example: A warehouse packer earning $17/hr is non-exempt, every decimal hour over 40 in a week generates overtime pay. The warehouse manager earning $55,000/year in a supervisory role is likely exempt, no overtime applies even during a 55-hour week.

The portion of federal income tax withheld from each employee's paycheck based on their W-4 elections and the IRS withholding tables. Unlike FICA, the withholding amount varies based on filing status, claimed deductions, and gross pay level. Employers remit withheld FIT to the IRS on a semi-weekly or monthly deposit schedule. The amount withheld isn't the employee's final tax bill, it's a prepayment that's reconciled when they file their annual tax return.

Example: An employee earns $1,800 gross per biweekly period and claims "Single, no adjustments" on their W-4. Using the IRS 2024 Publication 15-T wage bracket tables, the employer withholds approximately $179 in federal income tax per period.

The federal law that funds Social Security and Medicare by taxing both employee and employer. Employees pay 6.2% of wages to Social Security and 1.45% to Medicare. Employers match both amounts dollar for dollar. In 2026, Social Security tax only applies to the first $184,500 an employee earns; Medicare has no cap. High earners also owe an extra 0.9% Medicare surtax on wages above $200,000. Because FICA is a flat percentage of gross pay, wrong decimal hours mean wrong FICA, which costs the company money too.

Example: An employee's gross pay for a period is $1,400. Employee FICA: Social Security $86.80 (6.2%) + Medicare $20.30 (1.45%) = $107.10. The employer also pays $107.10 in matching FICA, for a combined $214.20 going to the federal government.

The 1938 federal law that sets the floor for wages and overtime across most of the US. Under the FLSA, non-exempt employees must get paid 1.5x their regular rate for every hour worked past 40 in a workweek. It also sets the rules for time rounding (29 CFR § 785.48) and requires employers to keep accurate records of hours worked. Get this wrong and you're looking at back wages, liquidated damages on top, and civil penalties. The DOL audits time records and the burden of proof sits with the employer.

Example: An employee works 43.5 decimal hours in a week at $18/hr. Under FLSA: 40 hours × $18 = $720 regular pay + 3.5 hours × $27 (1.5×) = $94.50 OT = $814.50 total gross pay. Underpaying by miscalculating those 3.5 hours could constitute an FLSA violation.

The annual IRS form used by employers to report and pay their Federal Unemployment Tax Act (FUTA) liability. Filed once per year, due January 31st for the prior calendar year. Form 940 reconciles any quarterly FUTA deposits made throughout the year against the actual annual liability. FUTA taxes are paid entirely by the employer, nothing is withheld from employee wages.

Example: A small business paid $180,000 in total wages in the prior year. FUTA applies to the first $7,000 per employee. If all employees earned over $7,000, the FUTA base is $7,000 × number of employees. The employer files Form 940 by January 31st showing this calculation and any deposits made.

The quarterly IRS form employers file to report wages paid, federal income tax withheld, and both employee and employer FICA contributions. Filed four times per year (April 30, July 31, October 31, January 31). Form 941 is essentially a reconciliation between payroll records and federal tax deposits. Errors in decimal hour tracking upstream can cause discrepancies that trigger IRS notices.

Example: A company with 12 employees files Form 941 for Q1. The form reports $84,600 in total wages, $8,553 in FICA employee contributions, $8,553 in FICA employer contributions, and $11,200 in federal income tax withheld, all tied back to the quarterly payroll register.

Tax forms used to report payments to non-employees. Form 1099-NEC (Non-Employee Compensation) reports payments of $600 or more to independent contractors, freelancers, and self-employed individuals during the tax year. Form 1099-MISC reports other miscellaneous income. Unlike employees who receive W-2s, contractors receiving 1099s are responsible for their own self-employment taxes (15.3% on net earnings) and estimated quarterly tax payments.

Example: A freelance designer invoices $12,000 in decimal-hour-based billing over the year to one client. The client issues a Form 1099-NEC for $12,000 by January 31st of the following year. The designer must report this income on Schedule C and pay self-employment tax on the net earnings.

A federal tax paid entirely by employers (not withheld from employees) that funds federal unemployment benefits and state workforce agencies. The FUTA rate is 6% on the first $7,000 of each employee's annual wages, but employers in states with no outstanding federal loans receive a credit of 5.4%, effectively reducing the rate to 0.6%. FUTA is paid quarterly if the liability exceeds $500; otherwise it's paid annually with Form 940.

Example: A company has 8 employees, all of whom earned more than $7,000 by mid-year. Their FUTA base is 8 × $7,000 = $56,000. Effective FUTA rate: 0.6%. Total annual FUTA liability: $336, paid in quarterly deposits once the threshold is met.

An independent contractor provides services to a business but isn't an employee, they control how and when they work, typically supply their own tools, and may work for multiple clients. Contractors invoice using decimal hours and are responsible for their own self-employment taxes, health insurance, and retirement planning. Employees are subject to employer direction and control, have taxes withheld, and may receive benefits. The IRS uses a multi-factor "behavioral control, financial control, and relationship" test to distinguish the two.

Example: A contractor tracks 14.5 billable hours on a client project at $85/hr, invoices $1,232.50, and pays their own 15.3% self-employment tax. An employee doing the same work would have taxes withheld automatically by the employer each period.

Incorrectly classifying an employee as an independent contractor, either accidentally or deliberately, to avoid paying benefits, payroll taxes, and overtime. Misclassification violates FLSA and IRS rules and can trigger back wages, unpaid overtime, back taxes, and substantial penalties. State labor agencies (particularly California's EDD and the DOL) actively pursue misclassification cases. Accurate decimal hour records for affected workers are often the central piece of evidence in calculating what's owed.

Example: A landscaping company labels workers as "contractors" but controls their hours and equipment. A DOL investigation finds misclassification. The company owes two years of back overtime pay (hours over 40/week × 0.5× rate), plus employer FICA contributions they should have made, calculated from workers' timesheet records.

Income tax levied by individual state governments on employees' wages, withheld by employers from each paycheck and remitted to the state tax agency. Rates and structures vary considerably, some states (like Texas, Florida, and Nevada) have no state income tax, while others have progressive brackets up to 13%+. SIT is calculated on taxable gross pay, typically after pre-tax deductions, and the amount is informed by state-specific withholding certificates (similar to the federal W-4).

Example: An employee in Illinois (flat 4.95% income tax rate) earns $2,400 taxable gross in a pay period. State income tax withheld: $2,400 × 4.95% = $118.80, remitted to the Illinois Department of Revenue.

An employer-paid state tax that funds unemployment insurance for workers who lose their jobs through no fault of their own. Like FUTA, SUTA applies only up to a per-employee wage base that varies by state. Rates vary too, based on the employer's "experience rating": fewer layoffs means lower rates. SUTA isn't withheld from employee wages in most states. It's purely an employer expense.

Example: An employer in Ohio has a SUTA rate of 2.7% on a $9,000 wage base. For an employee who earns over $9,000 annually, the total SUTA cost is $9,000 × 2.7% = $243 for the year, all paid by the employer.

The annual tax document employers must send to each employee by January 31st, showing total wages paid and taxes withheld during the prior calendar year. Employees use their W-2 to file their personal income tax returns. The figures on the W-2, particularly Box 1 (federal wages) and Box 4 (Social Security tax withheld), are reconciled against payroll records, which depend on accurate decimal hour calculations throughout the year.

Example: An employee earned $47,200 in wages over the year. Their W-2 shows: Box 1 (federal taxable wages) $43,500 (after pre-tax 401k and health deductions); Box 3 (Social Security wages) $47,200; Box 4 (SS tax withheld) $2,926.40; Box 6 (Medicare tax withheld) $684.40.

The IRS form new employees complete to tell their employer how much federal income tax to withhold from each paycheck. Updated for 2020, the current W-4 uses dollar amounts for adjustments instead of "allowances." Employees can update their W-4 at any time and should do so after life events like marriage, divorce, or having a child. Employers use the W-4 elections together with IRS Publication 15-T withholding tables to calculate per-period FIT withholding.

Example: A new employee who is married filing jointly with a spouse also working can claim the "Married filing jointly" status on Step 1 of the W-4 and enter the additional standard deduction adjustment in Step 3 to reduce overwithholding.

The form businesses use to collect a contractor's or vendor's Social Security number or EIN before making payments. The W-9 isn't filed with the IRS. It stays on file with the business and feeds into the Form 1099-NEC at year-end. Any business paying a contractor $600 or more during the year should have a W-9 on file before the first payment goes out. Freelancers should expect to complete one at the start of any new client engagement.

Example: A marketing agency hires a freelance copywriter for a project. Before the first invoice is paid, the agency emails the writer a W-9 to collect their SSN or EIN. At year-end, if payments totaled $600+, the agency uses that info to file a 1099-NEC.

A doctrine in US employment law stating that either the employer or the employee can end the employment relationship at any time, for any reason (or no reason), without notice, provided the termination isn't for an illegal reason (discrimination, retaliation, etc.). Most US states are at-will by default, with exceptions for Montana and employees covered by contracts or union agreements. At-will status doesn't exempt employers from paying final wages including all accrued hours, overtime, and PTO owed under state law.

Example: An employer in Texas ends an employee's employment without notice on a Wednesday. Under at-will doctrine, this is generally legal. However, the employer must still pay all earned wages, including every decimal hour worked through Wednesday, by the next regular payday.

Software used by employers to manage the recruiting process, posting jobs, collecting applications, screening resumes, scheduling interviews, and tracking candidates through each stage of the hiring pipeline. Popular ATS platforms include Greenhouse, Lever, and Workday Recruiting. While ATS systems don't track hours directly, new hires onboarded through an ATS feed into the HRIS and payroll systems where time tracking begins.

Example: A company posts a "Payroll Coordinator" opening in their ATS. The system collects 47 applications, auto-screens for required qualifications, and advances 8 candidates to a phone screen. Once hired, the new employee's start date and hourly rate flow automatically to the HRIS.

Under FLSA, short rest breaks of 20 minutes or less must be counted as compensable time and paid. Bona fide meal periods (typically 30 minutes or more) where the employee is completely relieved of all duties aren't compensable and can be excluded from decimal hour totals. Many states have additional break requirements that are more generous than federal minimums. The key test: can the employee actually use the break time for their own purposes?

Example: An employee takes a 15-minute paid rest break at 10 AM and a 30-minute unpaid lunch break at noon (during which they're free to leave the building). The 15 minutes is included in their decimal hours; the 30-minute lunch is excluded, reducing compensable time by 0.5 hours for that day.

Paid time off given to an employee in lieu of overtime cash pay, at a rate of at least 1.5 hours of leave for each overtime hour worked. The FLSA permits comp time arrangements only for state and local government employees, private sector employers generally can't substitute comp time for overtime cash pay. When comp time is used, the decimal hours taken as leave must be tracked and deducted from the employee's comp time bank.

Example: A county government employee works 8 overtime hours during a busy period. Instead of receiving $12/hr × 8 × 1.5 = $144 in cash, they receive 12 hours of comp time (8 × 1.5) to use as paid leave on future days.

A federal law granting eligible employees up to 12 weeks of unpaid, job-protected leave per year for qualifying family and medical reasons, including the birth of a child, caring for a seriously ill family member, or an employee's own serious health condition. Employees on FMLA leave accrue no hours for pay purposes (it's unpaid), but their decimal hour records must clearly document the leave period to ensure correct year-end calculations and prevent FMLA interference claims.

Example: An employee takes 8 weeks of FMLA leave. Their timesheet shows 0.0 hours (or FMLA leave code) for those 8 weeks. No wages accrue, but the employee's position and benefits are protected. Decimal hour totals resume when they return.

A unit of measurement that represents one employee working full-time hours, typically 40 hours per week or 2,080 hours per year. FTE is used to compare staffing levels regardless of whether workers are full-time or part-time. Calculated by dividing total decimal hours worked by all employees by the standard full-time hours. Accurate decimal hour totals are required to calculate FTE ratios correctly, especially for ACA (Affordable Care Act) compliance, which has employer mandate thresholds based on FTE count.

Example: Two part-time employees each working 20.0 decimal hours per week together equal 1.0 FTE. Five employees at 32 decimal hours/week = 160 hours ÷ 40 = 4.0 FTE, not 5.0.

A broader category of HR software and practices that encompasses the entire employee lifecycle, recruiting, onboarding, time tracking, payroll, performance management, learning, and offboarding. HCM platforms (like Workday, SAP SuccessFactors, and Oracle HCM) often include integrated time and attendance modules that feed decimal hours directly into payroll processing. HCM is a superset of HRIS; all HRIS systems are part of HCM, but not all HCM features are HRIS.

Example: A 500-person company uses Workday as their HCM platform. Employees clock in via the mobile app, which converts punches to decimal hours, routes them through manager approval, and exports to payroll automatically each Thursday.

Software used to centralize and manage employee data, personal information, employment history, compensation, benefits, time off balances, and performance records. Most HRIS platforms include time tracking and payroll modules or integrate with dedicated payroll systems. Common HRIS platforms include BambooHR, ADP Workforce Now, Rippling, and Paychex Flex. When time entries are made in the HRIS, they're typically stored in decimal hours for downstream payroll processing.

Example: A manager logs into BambooHR to approve a direct report's timesheet. The system shows 42.25 decimal hours for the week, flags the 2.25 overtime hours, and sends the approved data to payroll processing automatically.

A USCIS form that employers must complete for every new hire to verify their identity and legal authorization to work in the United States. Both employer and employee have specific sections to complete within required timeframes (employee by first day of work; employer by third business day). The I-9 doesn't affect time tracking directly, but without a valid I-9 on file, an employer faces significant fines for employing unauthorized workers.

Example: A new warehouse associate starts on Monday. They complete Section 1 of the I-9 on their first day and present a passport (List A document) to the employer. The employer completes Section 2 by Wednesday (the third business day). The completed I-9 is retained for 3 years from hire date or 1 year after termination, whichever is later.

An approved period during which an employee temporarily stops working, either paid (using PTO, FMLA, or company-paid leave) or unpaid. Leaves of absence include medical leave, parental leave, military leave, personal leave, and jury duty. Time tracking systems must accurately reflect leave periods, hours taken as paid leave count toward the decimal hour total for pay purposes, while unpaid leave shows zero compensable hours for those days.

Example: An employee takes a 2-week unpaid personal leave of absence. Their timesheet shows LOA codes for 10 business days. They receive no pay for those days, and the pay period's decimal hours are reduced accordingly. Benefit accruals may pause depending on company policy.

Time during which an employee is required to be available to work if called, but isn't actively working. Whether on-call time is compensable (and thus counts toward decimal hours and overtime) depends on the degree of restriction placed on the employee. If an employee must remain on the employer's premises or is so restricted that they can't use the time effectively for personal purposes, it's compensable. Waiting at home and free to come and go is generally not compensable.

Example: A hospital IT technician is required to stay on-site in an on-call room from 10 PM to 6 AM in case systems fail. Because they're required to remain on premises, all 8 hours count as compensable time, adding 8.0 decimal hours toward overtime calculations.

The minimum wage rate (and fringe benefits) that contractors and subcontractors must pay workers on federally funded construction and service contracts, as established by the Davis-Bacon Act and Service Contract Act. Prevailing wages are determined by the Department of Labor and vary by geographic area and job classification. Accurate decimal hour records are especially critical on prevailing wage projects, as underpayment, even by a fraction of an hour, can trigger back wage liability and contract debarment.

Example: A masonry contractor on a federal courthouse project must pay their workers the DOL-published prevailing wage of $38.92/hr plus $16.20/hr in fringe benefits. Every decimal hour worked must be documented and certified in weekly payroll reports submitted to the contracting agency.

A bank of paid leave hours that employees can use for any purpose, vacation, illness, personal days, or family needs. Some employers separate vacation, sick, and personal time into distinct buckets; others combine them into a single PTO pool. PTO accrues at a set rate per pay period or hours worked, and the accrual calculation often uses decimal hours as its basis. PTO hours taken appear on timesheets as paid hours and count toward the weekly total for pay purposes, though they don't count toward overtime in most cases.

Example: An employee accrues PTO at 0.077 hours per decimal hour worked. In a 40-hour week, they earn 3.08 hours of PTO. After taking a 5-day (40-hour) vacation, their timesheet shows 40.0 PTO hours and 0.0 regular hours, full pay, but no overtime liability.

Additional pay provided to employees who work less desirable shifts, such as evenings, nights, weekends, or holidays. Shift differentials are typically expressed as a flat dollar add-on per hour or as a percentage increase (e.g., $2.50 extra per hour for night shift, or 15% premium for weekends). The differential must also be factored into the regular rate of pay when calculating overtime, which makes decimal hour precision even more important on split-shift payrolls.

Example: A nurse works 12 hours on a night shift (7 PM–7 AM) at a base rate of $32/hr plus a $4.00 night differential. Their effective rate for those 12.0 decimal hours is $36/hr. If these are overtime hours, the OT rate is based on $36 × 1.5 = $54/hr, not just the base rate.

Time an employee spends traveling as part of their job duties. Not all travel time is compensable under the FLSA. Regular commuting to and from a fixed worksite isn't compensable. Travel between job sites during the workday is compensable. Overnight travel away from home on employer business is compensable during hours that correspond to normal working hours, even on weekends. Each compensable travel segment should be logged in decimal hours and added to the daily total.

Example: A field technician drives 45 minutes from the office to a job site, then 30 minutes to a second site, then 40 minutes back to the office. The two mid-day legs (45 min + 30 min = 75 min = 1.25 decimal hours) are compensable. The 40-minute return trip to a fixed office may or may not be compensable depending on company policy.

Under the FLSA, a workweek is a fixed, regularly recurring period of 168 hours, 7 consecutive 24-hour periods. Employers choose the start day and time for their workweek (e.g., Monday at 12:01 AM), and the choice must be fixed and applied consistently. Overtime thresholds reset with each new workweek, hours can't be averaged across multiple weeks. This is why a biweekly pay period can contain two separate overtime calculations (one per workweek), even though only one paycheck is issued.

Example: An employer's workweek runs Sunday–Saturday. An employee works 44 decimal hours in week one and 36 in week two. They receive 4 hours of overtime for week one ($$$) even though their total for the biweekly period is only 80 hours, exactly 40 per week on average.

Time you can charge a client for, as opposed to internal admin work, business development, or any other overhead hours the client doesn't pay for. Most professionals bill in decimal format: 1 hour 18 minutes goes on the invoice as 1.3 hours. The most common mistake is entering 2:45 as 2.45 instead of 2.75. At $180/hr, that's a $54 underbill on a single time entry. Multiply that across a month and it adds up to real money. Accurate HH:MM to decimal conversion is what keeps invoices clean and defensible.

Example: A consultant works 2 hours 45 minutes on a client project. That's 2.75 decimal hours. At $150/hr, the billable amount is $412.50. Billing $150 × 2.45 (treating it as decimal without converting) would underbill by $45.

The hourly rate a freelancer or professional service firm charges clients for work performed. The billing rate is typically higher than the internal cost rate (hourly compensation + overhead), with the gap representing profit margin. Billing rates may vary by project type, client, urgency, or team member seniority. On invoices, total billed amount = billing rate × decimal hours worked.

Example: A senior developer bills at $185/hr. In a given week they log 23.5 billable decimal hours to a client. Invoice amount: $185 × 23.5 = $4,347.50, all dependent on accurate decimal hour logging throughout the week.

The rate at which a project is consuming its budget or allocated hours, typically tracked in decimal hours per week or per billing period. Burn rate helps project managers and freelancers spot scope creep early, if a project is burning 12 decimal hours/week against an estimate of 8, the project will blow its budget by 50% unless scope or rate is adjusted. Monitoring burn rate in decimal format makes it easy to compare against estimates and remaining hours.

Example: A project has a fixed budget of 80 decimal hours at $120/hr ($9,600). After 3 weeks, 52.5 hours have been logged. Burn rate: 17.5 hours/week. At that pace, the remaining 27.5 hours will be exhausted in 1.6 weeks, well short of the 4-week timeline planned.

The actual earnings per hour when total income is divided by total hours worked, including both billable and non-billable time. The effective rate is almost always lower than the posted billing rate because non-billable hours (admin, prospecting, professional development) don't generate income directly. Freelancers use effective rate to evaluate whether their billing rate adequately covers their real time investment and cost of doing business.

Example: A freelance writer bills $80/hr and logs 20 billable hours per week ($1,600). But they also spend 15 non-billable hours on admin and business development. Effective rate: $1,600 ÷ 35 total hours = $45.71/hr, much lower than the billing rate suggests.

A project engagement where the client pays a predetermined flat amount for the full scope of work, regardless of how many hours it takes. Fixed-fee contracts transfer scope risk from the client to the service provider, if the project takes longer than estimated, the provider absorbs the extra cost. Even on fixed-fee projects, tracking decimal hours is critical for profitability analysis and building better estimates for future projects.

Example: A designer quotes a logo project at $2,000 fixed fee, estimating 16 hours of work ($125/hr effective). If it takes 22 hours, the effective rate drops to $90.91/hr. That decimal hour variance directly informs how they should price the next similar project.

A formal payment request sent by a service provider to a client, itemizing the work performed, decimal hours logged, rates applied, and total amount due. A well-structured invoice includes the service date range, a description of work, decimal hours for each task or day, the billing rate, and a total. Decimal hours are preferred over HH:MM on invoices because they make the math transparent and self-verifiable for clients.

Example: An invoice line reads: "Website content writing, March 1–15, 8.75 hours @ $95/hr = $831.25." The client can verify: 8.75 × 95 = 831.25. That clarity builds trust and reduces payment disputes.

Payment terms on an invoice indicating that the client has 30, 60, or 90 days from the invoice date to pay in full. "Net 30" is the most common standard in freelance and B2B services. Shorter terms (Net 15, Net 7) are increasingly common in freelance work and favor the service provider's cash flow. Some invoices offer early payment discounts, like "2/10 Net 30" meaning a 2% discount if paid within 10 days.

Example: A freelance consultant sends an invoice dated March 1st with Net 30 payment terms. The client must pay by March 31st. If they pay by March 11th (10 days), a "2/10 Net 30" discount clause would save them 2% of the invoice total.

Time spent on work activities that can't be charged to a specific client, internal meetings, business development, proposal writing, professional development, invoicing, and general administration. Non-billable hours are a cost to the business or freelancer that must be covered by the margin built into billing rates. Tracking non-billable time in decimal hours alongside billable time gives a complete picture of capacity and profitability.

Example: In a given week, a consultant logs 28.5 billable hours and 11.5 non-billable hours (3.0 internal meetings, 4.5 proposal writing, 4.0 admin). Total hours: 40.0. Billable percentage: 28.5 ÷ 40.0 = 71.25%, their utilization rate.

The comparison between the decimal hours estimated before a project begins and the actual decimal hours logged once work is complete. This variance analysis is fundamental to improving estimating accuracy over time. Most project management and time tracking tools display estimated vs. actual hours in decimal format to make the comparison easy. A consistent pattern of underestimating signals that pricing adjustments or scope conversations are needed.

Example: A project was estimated at 40 decimal hours. Actual hours logged: 53.25. The variance is 13.25 hours (33% over). On a $150/hr T&M project, this results in $1,987.50 more billed than the estimate, but on a fixed-fee project, it would be a significant loss.

A pre-paid arrangement where a client pays a fixed amount upfront each month to secure a freelancer's or agency's availability for an agreed number of hours. Retainers provide predictable income for the service provider and guaranteed availability for the client. Hours worked are tracked in decimal format, if usage exceeds the retainer hours, the overage is billed at the agreed rate; if the client uses fewer hours, policies vary on whether they roll over or expire.

Example: A $3,000 monthly retainer covers 15 decimal hours at $200/hr. In March, the client uses 18.5 hours. The invoice is $3,000 (retainer) + 3.5 × $200 = $3,700 total. The extra 3.5 hours are the overage billed separately.

A formal document that defines the scope, deliverables, timeline, and payment terms for a project or service engagement. The SOW establishes the boundaries of what work will and won't be done, often including estimated hours in decimal format for each phase. When scope changes occur, an amended SOW (or change order) documents the additional hours and corresponding fees. A well-written SOW prevents billing disputes by establishing clear expectations upfront.

Example: An SOW for a website redesign states: Phase 1 – Discovery (6.0 hours), Phase 2 – Design (20.0 hours), Phase 3 – Development (40.0 hours), Phase 4 – QA and Launch (8.0 hours). Total: 74.0 decimal hours at $125/hr = $9,250.

A billing increment of 0.1 hour = 6 minutes, the standard unit used in legal billing and many professional service firms. Every 6-minute block of time is one billing unit. Using tenth-of-an-hour billing requires converting all time records to decimal, a 22-minute call is 0.4 hours (rounded to the nearest tenth), not 0.37. This system makes invoices easy to audit: each line item is a whole number multiple of 0.1.

Example: An attorney spends 7 minutes drafting an email (0.2 hr), 18 minutes on a call (0.3 hr), and 1 hour 12 minutes reviewing documents (1.2 hr). Total: 1.7 decimal hours. At $350/hr, the bill is $595, clean and auditable.

A billing increment of 0.25 hours = 15 minutes. Quarter-hour billing is common in trades, IT support, coaching, and some consulting fields. Each unit of billable time is rounded to the nearest 15-minute block, a 22-minute task rounds up to 0.5 hours (30 minutes); a 35-minute task rounds to 0.5 or 0.75 hours depending on rounding convention. In decimal hours, quarter-hour increments are always multiples of 0.25.

Example: An IT support technician completes three tasks: 8 min (0.25 hr), 22 min (0.5 hr), and 51 min (1.0 hr). Total billed: 1.75 decimal hours. At $95/hr, the invoice shows $166.25. Without decimal conversion, the math wouldn't work cleanly.

A contract structure where the client is billed for actual time worked (in decimal hours, multiplied by agreed hourly rates) plus any direct material costs, rather than a fixed project price. T&M contracts are common for projects with undefined scope, ongoing maintenance relationships, and engineering or construction work. They favor the service provider when project scope is uncertain because all hours are compensated, but they require meticulous decimal hour documentation to support every invoice.

Example: A plumbing contractor on a T&M contract logs 6.75 decimal hours of labor at $95/hr plus $340 in parts. Invoice: (6.75 × $95) + $340 = $641.25 + $340 = $981.25. The client owes exactly what the work cost, no more, no less.

A single recorded unit of work in a time tracking system, typically including a date, project code, task description, and duration (usually stored internally in decimal hours). Time entries are the atomic building blocks of timesheets, invoices, and project reports. Good time entry hygiene means logging work promptly, using accurate decimal durations, and including enough description to make the entry defensible on an invoice or audit.

Example: A freelance translator creates a time entry: Date: April 14 | Project: Client XYZ Quarterly Report | Task: Translation | Duration: 3.25 hours | Notes: Translated pages 12–28. That 3.25 decimal hours entry feeds into an invoice line showing 3.25 × $0.18/word-equivalent or 3.25 × $75/hr.

The percentage of total working hours that are billable to clients. Utilization rate is a key performance indicator for consultants, agencies, and law firms. A higher utilization rate means more revenue-generating work relative to overhead time. Target utilization rates vary by industry, 65–75% is common for consulting; 80–85% for legal billing. Calculated as: (billable decimal hours ÷ total decimal hours) × 100.

Example: A consultant logs 34.0 billable hours and 8.0 non-billable hours in a week (42 total). Utilization rate: 34.0 ÷ 42.0 × 100 = 80.95%. Most agencies would consider this excellent utilization.