HR & Employment

The ultimate guide to contracted hours vs actual hours

Bryan Brown | 10 November 2021 | 3 years ago

Contracted hours vs actual hours

When it comes to contracted hours vs actual hours, you may be wondering what the difference is. There are many employees who are working significantly more or less than the number of hours shown in their employment contract who may be wondering where they stand in regards to laws around working hours.

The number of hours that an employee is contracted to work is the minimum number of hours that their employer must provide to the employee and pay them for, even if the actual number of hours that have been worked are higher or lower on any given week.

Understanding the difference

Typically, contracted hours are set out in a contract of employment issued at the start of a new role between an employer and employee. This contract will include information on how, when and where these contracted hours are to be worked, including any requirements around overtime, holiday and sick leave. During the course of doing their job, employees may find that they work more or less than their contracted hours in a given week. It’s the sum of those hours actually worked that would be referred to as ‘actual hours’.

Read on to find out more about contracted hours, why they might vary from the actual hours worked and the working hours regulations that employers and employees should be aware of. 

What are contracted hours?

Contracted hours are the agreed number of hours that an employer is contractually obliged to provide work for and pay an employee for. On the flip side, contracted hours are also the number of hours that an employee must be available for, and work in a normal working week, unless other arrangements have been made such as a shift swap with a colleague. If your employer cannot give the minimum number of hours agreed, they are required to pay you in lieu.

This number of hours is usually agreed in the employee’s contract or employment where one exists but the number of actual hours worked won’t always match the contracted hours due to holidays and sickness.

For example, if an employee’s contract of employment states they will work a 35-hour week, the employer must provide the opportunity for them to complete those hours. If they cannot, they will be in breach of the contract. Similarly, if an employee doesn’t work their full 35 hours, they could be in breach of their employment contract.

What are actual hours?

If contracted hours are the minimum number of hours that an employer is required to pay an employee, actual hours are the hours that the employee has physically worked in a given time period, regardless of the type of activities. and if the hours worked are different to any usual shift pattern that may exist.

Factors that affect the number of actual hours worked include overtime, annual leave, sick leave or other types of absences and additional workload. In regards to overtime, some companies include mandatory overtime in their contracts of employment which obligates the employer to work more hours in certain situations. Most of the time however, overtime is voluntary and is usually incentivised to promote the take up of additional hours by employees.

For example, if an employee contracted hours at 35 hours per week but 5 hours of overtime have been worked, then the actual hours worked could be 40 hours for that week and this is what the employer would need to pay the employer for.

The way actual hours are calculated and recorded will vary between employers. Some may use a clocking system, others will operate manual timesheets, but whatever time the employee has spent working for the company, this must be paid at the agreed rate set out in the contract of employment.

What about zero hours contracts?

What about zero hours contracts

The term ‘zero hours Contract’ describes a type of employment contract between an employer and employer where there is no minimum number of working hours that the employer is required to offer or pay the employee for.

In this scenario, the contract differs from a typical employment contract in that the employee will only be paid for the actual hours worked, and they are not obliged to accept any hours offered to them.

These types of contacts are common in hospitality, gigging, delivery driving, warehouse and care industries where demand for services can rise and fall. A zero-hours contract gives both employers and employees flexibility to boost or reduce their staffing levels or income at short notice.

How does holiday and sick pay affect things?

The actual hours worked in any given time period will be affected by absence or additional workload.

Absence due to sickness or annual leave will reduce the number of actual hours worked, whereas any overtime worked will increase the number of actual hours worked.

In most organisations, annual leave is counted as paid time off, so in those scenarios, the number of hours the employee is paid for wouldn’t be impacted by taking a day off.

Sick leave payments vary between employers, with some choosing to offer this benefit after a probationary period is complete for example. It’s important therefore that employees check their terms of employment as to whether they are eligible for company sick pay. If they are, then they will be paid for some or all of the time they are off due to being unwell.

In the absence of a company sick pay policy, employees are entitled to receive £96.35 per week Statutory Sick Pay (SSP) from the government if they’re too ill to work. This amount is paid by the employer for up to 28 weeks once certain criteria are met.

What does the law say about hours worked?

Employment law on hours worked

There are strict rules on the number of hours that employees can work in any given week based on their age and type of work that they are employed to do.

When working out the number of hours of overtime available or creating shift patterns for employees, it’s important that employers pay attention to the rules below and any specific guidelines relating to the industry they operate in.

Equally, employees are required to adhere to these requirements too, so if they work more than one job, it will be their responsibility to ensure that they are not overworking.

The working time regulations law states:

  • Nobody should work more than 48 hours a week on average. The average is usually calculated over 17 weeks unless they do a job not covered by the law on working hours
  • Individuals under 18 can’t work for more than 8 hours a day or 40 hours a week.
If the hours you work each week vary, you may wonder how to keep track of what your working average is. To calculate an individual’s weekly working hours you should take the total number of hours worked over a 17 week period and divide the total by 17 to provide the average hours worked.

Working more than the average

Employers can ask employees over 18 years old to work more than 48 hours on average per week but in order to do this, the employee must ‘opt out’ of the 48-hour regulations.

Employees can also refuse requests by their employer to work more than the 48-hour average, and they cannot be sacked or penalised for this.

Due to the nature of their roles, air transport jobs, lorry, bus and coach drivers and crew, river and lake transport and seafaring jobs all have their own working time laws and other industries also operate with allowed exceptions to the rules.

For full information on what the law says about maximum working hours in a week, visit gov.uk 

Exceptions & variations to working hours laws

Due to the specialised nature of some roles, their location, need to be available at short notice and manage emergency situations or being independent workers, there are some roles that are exempt or have flexibility from regular working time regulation law.

In practice, this means that workers in certain roles will have a higher number of actual hours than their contracted hours and may also exceed the recommended working week averages on occasion without penalty.

The jobs below do not have to follow all of the regulations:

  • Emergency responders including ambulance workers and firefighters and prison staff are covered except for in emergencies.
  • Off-shore workers have a working time limit over 52 weeks instead of 17.
  • Armed forces, police or civil protection services are excused in emergency situations
Flexibility is also offered in the following circumstances but in all cases, workers must ensure they take their required breaks and have sufficient time off between shifts.

  • When shift workers change a shift pattern
  • Workers that travel a lot between different locations such as sales people and corporate account managers
  • Roles where employees are needed to work longer hours to provide a continuity of service or production such as, in agriculture roles, hospitals, postal services, research and development etc.
Adult domestic servants in private homes and people that are in charge of their own hours such as company directors and the self-employed are not covered by working time regulations but should still ensure that regulated breaks are taken.

Keeping track of actual hours worked

Keeping track of hours worked

Whether working patterns are fairly standard or tend to vary a lot at your place of work, having a reliable way to monitor and keep track of hours worked is crucial. Knowing the actual hours worked is vital to both employers and employees to ensure that employees are paid correctly when their contracted hours differ from the actual hours worked.

Options for logging hours worked

  1. Mobile apps
  2. Biometric clock-in
  3. Pen and paper
  4. Time clocks.
  5. Browser plug-ins and URL tracking

Pen and paper

Even in today’s digitalised society, good old fashioned pen and paper has its place when tracking employee hours. It can be a particular benefit of working in areas with poor internet connectivity, as a manual log of hours can be referred to and uploaded to relevant software when back online.

To make working out the hours worked as simple and time-efficient as possible, it usually makes sense to load employee paper submissions into an excel spreadsheet as the very minimum. The figures can then be exported to the payroll system and prevent manual calculations.

Mobile apps

There are lots of mobile apps available to track actual time worked. Clockify for example allows employees to track their time spent on any given project or shift work and assign it to clients which may be helpful for project-based roles. Apps, in general, are also great at offering a reminder to employees to log their hours if they have been inactive for a long period of time – great for when hours need to be submitted in time for the payroll run.

Biometric

Not just something from the movies, biometric identification uses fingerprint or facial features to recognize an employee’s identity. This is a sure fire way to ensure individuals get credit for the work they’re doing as it makes the process of logging time for somebody else very hard. The downside of this option is that it could be an expensive way to track employee hours.

Browser plug-ins and URL trackers

If your organisation conducts most of its work in front of a computer, then URL based clock tools are a great way to track if employees are online when they say they are. They are also useful for tracking time spent against specific projects or clients as they can be started and stopped at will. To verify how your employees are using their working time, online time clocking tools can also track URLs visited so you can really see just how much time is spent on facebook.

Time clocks

This one might conjure up images of a by-gone era but a clocking in and out station is still used in many roles up and down the country. Having a station where employees record their time as they enter and leave their shifts can be an efficient way to ensure shifts are logged at the time they take place. This prevents having to rely on employees remembering the hours they worked after the event.

This type of approach can be managed by apps, tablets or kiosks using barcodes, ID numbers or pins that give each employee a unique identifier which is linked to the payroll system so you can see when they have worked and pay them accordingly.

Benefits of tracking hours worked

As outlined above, some roles and industries mean that employees just have to work when they are required, but for a larger proportion of the population in regular roles, keeping track of where their time is being worked has plenty of benefits for both employees and employers, including salaried employees that will be paid a fixed sum regardless of hours worked.

  • Helps to make better staffing decisions
  • Help staff to take the time off that they need
  • Ensure payroll is correct
  • Workout profitability by client or business area by comparing salary costs with revenue generated
  • Ensure working time regulations are being met

Summary

We hope this article has cleared up any confusion between contracted hours vs actual hours.

To recap:

  • Contracted hours are the hours employers are required to provide and pay their employers for
  • Actual hours are the number of hours actually completed in a given week, which can be more or less than the contracted hours.
  • Hours worked are regulated by working time regulation laws but there are exceptions to the 48 hours over a 17 week average for certain industries and specialist roles.
  • Hours worked can be tracked in a variety of ways but specialist time logging software can make keeping track of employees’ actual time worked easier to manage and export for accurate payroll records and payments.

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