Overtime Calculation in Malaysia: A Simple Guide for Efficiency

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Throughout your career, overtime (OT) is almost inevitable. Although not the most appealing part of any job, overtime could save you from exceeding a deadline and ensure your work could complete in time. 

Now the million-dollar question is – do you get paid?

What is overtime (OT)?

Put it in a simpler way, OT generally refers to working beyond your agreed normal working hours. The concept of overtime may vary across companies, as some consider any work beyond 8 hours per working day would be counted as overtime. Whereas, there are also companies with a written requirement for overtime threshold (e.g. any overtime within an hour is not eligible for overtime payment).

Malaysia’s Employment Regulations 1980 has a simple definition for employee overtime pay in Malaysia. According to Section 60A(3)(b), overtime is defined as the number of hours of work carried out in excess of the normal hours of work per day.

Entitlement of Employee Overtime Pay in Malaysia

As we dive into more details regarding working hours, how do we define “normal working hours” and “overtime”? Read on to find out!

Malaysia’s Labor Law on Normal Working Hours VS Overtime

The Malaysia Employment Act 1995 has been the rulebook for Malaysian companies. However, it is to note that Malaysia’s labor law applies to only those whose salary does not exceed RM1,500 per month. For those who exceed the threshold, your entitlement as an employee, overtime payment per se, will depend on the company’s policies and your signed agreement.

The general rule of drafting employee overtime pay in Malaysia starts with the working hours scheme for employees. Here are some rules to follow to consider as “normal working hours”:

  • Not more than 5 consecutive working hours without a resting interval of 30 minutes or more
  • Up to 8 working hours per day
  • Up to 48 hours working hours per week

Abide by the regulations, there is a maximum amount of overtime hours that could be carried out. Malaysian employees are limited to 104 working hours per month, which only up to 4 hours of overtime work could be carried out per day for health and well-being concerns.

Additionally, it’s important for employees to note that the Contract Law as per the Contracts Act 1950 would be enforced if salary exceeds the minimum amount. However, do compare the company offer and regulations to the legal practices and make reasonable negotiation where applicable.

Calculation for Employee Overtime Pay in Malaysia

Working Days

On any normal working days, the company should pay employee overtime at a rate of 1.5 times the hourly rate. This is applicable for employee overtime pay in Malaysia regardless of the salary being calculated by daily rate or monthly basis.

For employees who get paid on a monthly basis, the hourly rate could be obtained by dividing the monthly salary by 25 or 26 days, then divided by the amount of hours per normal working day.

Calculation Example (normal working days):

Monthly Salary = RM2,600

Working Hours per Day = 8 hours

Overtime = 4 hours

  • Normal Hourly Rate = Monthly Salary / Working Days per Month / Working Hours per Day

(RM2,600 / 26) / 8  = RM12.50

  •  Overtime Hourly Rate = Normal Hourly Rate * 1.5

RM12.50 * 1.5 = RM18.75

  • Overtime Pay = Overtime Hourly Rate * Overtime

RM18.95 * 4 = RM75

General Non-Working Days

General non-working days refer to rest days employees are entitled to. According to the Malaysia’s Employment Act, employees should be given at least one rest day per week. If the employee is given more than one rest day, the last day would be considered the rest day, which is entitled for employee overtime pay in Malaysia.

On non-working days, the employee overtime pay in Malaysia is commonly marked at 50% of the normal daily rate, given that the work hours did not exceed half of the normal working day hours (e.g. not more than 4 hours if the normal working days consist 8 hours per day). On the other hand, if the employee worked more than half of the normal working day hours, they would have to be paid at a full day’s pay.

Calculation Example (non-working days; not more than half working-day):

Monthly Salary = RM2,600

Working Days = 26 day

Overtime = 3 hours

Normal Daily Rate = (RM 2,600 / 26) / 8 = RM125

  •  Non-Working Days Overtime Hourly Rate = Normal Hourly Rate * 0.5

RM125 * 0.5 = RM62.50

  •  Overtime Pay = Non-Working Days Overtime Hourly Rate * Overtime

RM62.50 * 3 = RM187.50

Public Holidays

The calculation of overtime in Malaysia is rather simple than the working and non-working days. There are only two conditions to cater to:

  • If the overtime on a public holiday did not exceed normal working hours, the rate is 2 times of employee’s daily rate.
  • If the overtime on a public holiday exceeds normal working hours, the rate is 3 times the employee’s daily rate.

Also note that this applies whether the payment to employees is made based on hourly, daily or monthly basis.

HRIS for Overtime Calculation

As much as we try to simplify the calculation of employee overtime pay in Malaysia for you, there is a more effective way of dealing with the numbers that we would like to share with you!

GreatDay HR is an all-in-one human resource information system (HRIS) that helps make the calculation of payroll no longer a mundane, error-prone HR task. With the built-in feature of In-depth Attendance Management, employees could self-report work attendance via the application. The data is then processed to generate payroll, where employee’s overtime pay could be easily managed. Furthermore, the feature of Activity Recording allows employees to provide accurate and real-time location data. Supervisors could oversee employee’s activity and monitor their performance to ensure genuine data entry for overtime.

Ready to try out GreatDay HR? Enquire today to grab a free demo!

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