As Malaysia enters 2026 with a continued enforcement of the Employment Act 1955, understanding overtime pay is essential for every employer. For HR professionals and employers, accurate overtime calculation isn’t just about compliance, it’s about protecting your business from penalties and managing payroll efficiently. Whether you employ local or foreign staff, getting your overtime pay formula right helps you stay aligned with Malaysia’s labour laws.
This guide walks you through everything you need to know about overtime laws, pay formulas, and real examples under Malaysia’s 2026 regulations, so you can keep your payroll compliant and cost-effective.
What is Malaysia’s overtime law under the Employment Act 1955?
The key legislation in Malaysia related to employment matters is the Employment Act 1995 or EA 1995. According to the latest amendment, which has been in effect since 1 January 2023, the EA will apply to all employees irrespective of wages, with some specific sections not applying to employees earning more than RM4,000/month.
According to the labour laws in Malaysia:
- Workers can work up to 45 hours per week (excluding meal time) per week. Any work performed beyond that is considered overtime.
- The maximum overtime allowed is 104 hours per calendar month; that equals around 3.5 hours every day.
- For non-shift workers on an 8-hour day (excluding breaks), 5 days per week, the overtime limit remains at the maximum of 4 hours per day on the working days.
- The employer may require shift workers to work for more than 8 hours daily or more than 45 hours weekly. However, the average number of hours worked over any period of 3 weeks shall not exceed 45 hours per week.
- There should be a rest period of 30 minutes for every five hours of work.
- Malaysian labour law states that the overtime pay rate on a working day shall be no less than one and a half (1.5) times the hourly rate of pay.
What constitutes overtime work?
A simple definition of overtime work in Malaysia is the number of hours worked beyond normal working hours. This can mean more than 8 hours of work in one day or over 45 hours in a week. However, it is important to note that as per Malaysia’s Employment Regulations 1980, there is a limit to how much overtime work can be done, as mentioned above.
Who is eligible for overtime pay in Malaysia?
All employees covered by the Employment Act are entitled to overtime pay. Even employees earning above RM4,000/month, though technically excluded from certain EA provisions, are often given overtime benefits through company policy or employment contracts, ensuring fair and transparent compensation.
What are the penalties for not paying or delaying overtime wages in Malaysia?
Under the amended Employment Act 1955, employers who fail to pay overtime correctly can be fined up to RM50,000.
This applies to:
- Employers who do not pay overtime owed
- Employers who pay below the legal rate
- Late payment of wages or miscalculation of hours worked
Non-compliance can harm your employer brand and invite costly audits. If your business lacks an experienced local payroll team, consider outsourcing payroll in Malaysia to ensure full compliance and accuracy.
How is the overtime pay rate calculated in Malaysia?
Overtime rate in Malaysia depends on many factors, including:
- Whether an employee’s pay is monthly rated or daily rated
- Whether the employee worked on normal days, public holidays, or rest days.
How do you calculate overtime pay in Malaysia on normal working days?
For normal working days, an employee should be paid at a rate of 1.5 times their hourly rate for overtime work. This is applicable whether the employees are paid on a daily rate or on a monthly basis.
- First, calculate the daily ordinary rate of pay by dividing the monthly salary by 26.
- Then divide the ordinary rate by the number of normal work hours to get the hourly pay rate.
- Finally, calculate overtime pay by multiplying the hourly rate by 1.5 and then multiply this figure by the overtime hours.
For example:
- If the monthly salary is RM 1600,
- the normal working hours are 8 hours and
- overtime work is 10 hours.
Example of Overtime Rate in Malaysia Calculation:
Ordinary Rate = Monthly Salary / 26
- RM 1600 / 26 = RM 61. 53
Hourly Pay = Daily Rate of Pay / Normal Working Hours
- RM 61.5 / 8 = RM 7.6
Overtime Pay = Hourly Rate X Overtime Hours X 1.5
- RM 7.6 x 10 x 1.5 = RM 114
How do you calculate overtime pay on rest days in Malaysia?
Employees are entitled to at least one rest day per week. If an employee works on a rest day, the payment depends on how many hours they work:
| Work Duration on Rest Day | Pay Entitlement |
| < half normal working hours | 0.5 x ordinary daily rate |
| > half but < normal working hours | 1 x ordinary daily rate |
| Beyond normal working hours | 2 x hourly rate |
Example of Rest Days Calculations of Overtime Rate in Malaysia:
Monthly Salary = RM 1200,
Normal Work Hours = 8 Hours and;
Overtime Hours on A Rest Day= 3 Hours (Not Exceeding Normal Work Hours),
Calculate the Ordinary Daily Rate by Dividing Monthly Salary (RM 1200) By Working Days (26) = RM 46.15. As per the regulation, the employee has to be paid half the ordinary rate when the work hours on a rest day are below the normal working hours. (46.15/2 =RM 23. 07).
Employees on hourly or daily pay are entitled to a day’s wages if their work hours on a rest day do not exceed half the normal work hours. If the employee’s work hours on a rest day are more than half of the normal hours (but do not exceed normal working hours), they have to be paid two days’ wages. Any overtime work that is in excess of normal working hours needs to be paid at twice the hourly rate of the employee. This applies, regardless of whether the remuneration is on a daily or monthly basis.
How do you calculate overtime pay on public holidays in Malaysia?
If employees work overtime on a public holiday (not exceeding normal working hours), they need to be paid two days’ pay at ordinary rates. This applies whether the employee is on hourly, daily, or monthly payments.
If an employee’s working hours on a public holiday exceeds their normal working hours, they have to be paid three times their ordinary hourly rate.
Overtime Pay Comparison:
| Work Type | Rate | Example (RM/hour) |
| Normal Working Day | 1.5 x hourly rate | RM 7.60 x 1.5 = RM 11.40 |
| Rest Day | 2 x hourly rate (beyond normal hours) | RM 7.60 x 2 = RM 15.20 |
| Public Holiday | 3 x hourly rate | RM 7.60 x 3 = RM 22.80 |
What is the maximum overtime limit in Malaysia?
Under Section 60A of the Employment Act, the maximum overtime allowed is 104 hours per month. Employers must maintain accurate records to prove compliance. Exceeding this limit may lead to fines or investigation by the Department of Labour (Jabatan Tenaga Kerja Malaysia).
How do overtime laws apply to foreign workers and expats in Malaysia?
Malaysia’s overtime laws apply equally to foreign employees holding valid employment passes or work permits. Employers must include overtime terms in their contracts and ensure payment meets statutory rates.
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*Please use the information as a general guide, please contact us for more information.
