Guide to Calculating Overtime Pay for Employees in Malaysia

Looking for a reliable overtime calculator Malaysia businesses can use? For many growth-oriented businesses, overtime pay can make up a huge part of the payable remuneration to their employees each month. While you can search for simple overtime calculators online, it is important to understand the employment law, the rules, and the regulations related to overtime pay.

For businesses operating or looking to expand into Malaysia, outsourcing your payroll would be a smart option so you can let the professionals handle the calculations and regulations. It can get complicated very quickly as seen by our quick guide to calculating overtime pay for your employees in Malaysia below:

Malaysia Law On Overtime

The key legislation in Malaysia related to employment matters is the Employment Act 1995 or EA 1995. The Act applies to employees whose salary is below RM2000 per month. The rights of workers who earn more than RM2000 per month are covered by the Contract Law as per the Contracts Act 1950.

The rules for normal working hours as laid down by the EA 1995 include:

  1. Workers can work up to 48 hours per week for a maximum of three weeks.
  2. In one working day, employees can work up to 8 hours if it is a six-day workweek. If it is a five-day workweek, employees can work a maximum of nine hours per day.
  3. There should be a rest period of 30 minutes for every five hours of work.
  4. Including rest and leisure time, 10 hours is the maximum ‘spread over’ work hours.
  5. For continuous work such as shift work, there can be 8 consecutive hours along with 45 minutes or more of the paid rest period.

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 48 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. Employees can only work overtime for 104 hours in one month. On average, this translates to 4 hours of overtime work per day.

How To Determine Overtime Work in Malaysia

Overtime rate 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.

For Normal 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 and
  • the normal working hours are 8 hours
  • overtime work is 10 hours.

Example of Malaysia Overtime 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

For Rest Days

Every employee, under the Employment Act, is allowed one rest day a week at a minimum. If there is more than one rest day for an employee, the last day is considered the rest day to calculate overtime pay.

For employees on monthly pay, half of the ordinary pay rate has to be paid for a rest day’s work if the work hours do not exceed half of their normal work hours. If the work hours on a rest day exceed half of the normal work hours, a full day’s pay has to be paid.

Example Overtime Calculations for Rest Days:

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 does 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 does 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.

For Public Holidays

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.

*Please use the information as a general guide, please contact us for more information.

Take Your HR To the Next Level by Digitalising Your Payroll!

Keeping track of overtime pay in Malaysia can be challenging for HR professionals and employers, whether the business is large, medium, or small-sized. The complexities of payroll can make you wish for a magic overtime calculator Malaysia businesses can rely on!

By outsourcing your payroll to a trusted partner, you can skip these complications and focus on business growth! Links has been providing HR services in the APAC region for over 20 years, learn how we can help streamline your business operations by contacting us now!

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