All you need to know about overtime pay in Malaysia: how to calculate it

Knowing if you're eligible for overtime and learning how to calculate the amount you're due can help ensure your payment is correct. Read on to discover some aspects of overtime compensation. Here's what we'll cover:

• What is overtime (OT) pay?
• What's considered overtime hours?
• When should employers offer overtime pay?
• Who is eligible for overtime pay?
• How to calculate overtime pay in Malaysia
• Overtime pay regulations in Malaysia
• Conclusion
• FAQs

What is overtime (OT) pay? 

Overtime pay is the extra money you receive when you do overtime work past your regular hours. Companies usually pay overtime at a fixed hourly rate, which they calculate based on your salary. You may qualify for overtime depending on your contract and regular weekly hours.

Its purpose is to offer fair compensation for your extra time and effort in completing your duties and your meaningful contribution to the company's operations. The overtime system protects the interests of employees and employers. Fair overtime compensation creates a beneficial and impartial work environment.

In Malaysia, employees can receive overtime when they work more than the legislated number of working hours. Overtime rates usually apply after working eight hours per day or 45 hours per week. There are limitations to the amount of overtime work an employee can legally do. According to Malaysia's Employment Regulations 1980, employees can work up to 104 hours every month. This means you can work overtime for a maximum of four hours per day. 

What's considered overtime hours? 

Malaysia's employment regulations state that working more than eight hours per day or 45 hours per week constitutes overtime for salaried employees. The working period excludes breaks and mealtimes. Non-shift personnel who work five days a week, eight hours a day, can work overtime for a maximum of four hours daily. If you work shifts, you may need to do more than eight hours per day or 45 hours per week. In this case, the average number of hours you work over any three-week period should not exceed 45 hours per week. 

When should employers offer overtime pay? 

Employers should pay employees overtime in the following circumstances:

Overtime pay on a normal workday

Employees receive standard overtime at a minimum of 1.5 times their hourly rate. This applies to workers with daily or monthly salaries. To calculate your ordinary rate, divide your monthly salary by 26 days. Then, divide by your total daily ordinary hours – eight hours. Multiply your standard hourly rate by 1.5 to calculate your hourly overtime rate. Multiply this rate by the number of hours you worked. The result equates to your total paid overtime entitlement. This calculation method applies to all employees eligible for overtime compensation.

Overtime pay on a public holiday

Employers should pay overtime at twice an employee's hourly rate when working on a public holiday if they don't exceed the normal eight working hours. This is regardless of whether your pay period is hourly, weekly, or monthly. This rule also applies if you do overtime work on a public holiday that falls on a normal workday or rest day. If you work more than eight hours on a public holiday, your pay is three times your standard rate. This calculation method applies to all employees eligible for overtime compensation.

Overtime pay on a rest day

If you work overtime on a rest day, not exceeding half your normal working hours (up to four hours), you should receive half a standard day's wage. If you work on your rest day and exceed half your normal hours (between four and eight hours) that day, you should receive a standard day's wage. However, for more than your standard (eight) daily work hours, you should earn twice your ordinary rate. This calculation method applies to all employees eligible for overtime compensation.

Who is eligible for overtime pay? 

The Employment Act, which covers overtime regulations, applies to employees who fit the following overtime criteria:

• All salaried employees who earn less than RM4,000 monthly.
• Manual labour staff, regardless of their wages.
• Workers who operate mechanised vehicles, regardless of their wages.
• Workers who supervise manual labourers, regardless of wages.
• Employees in banking and finance, insurance, hotel and catering, and road transport, regardless of their income level (subject to industry-specific regulations).

These criteria apply regardless of your employment status or whether your payment period is hourly, daily, or monthly. You should receive your overtime compensation in addition to your salary.

How to calculate overtime pay in Malaysia 

Several factors affect how employers pay for overtime in Malaysia. Payment depends on whether overtime falls on a normal workday, rest day, or public holiday. The regulations also limit how many hours of overtime work an employee can do. Here are some examples of an employee's overtime pay in different scenarios:

• Siti works as an administrative assistant.
• They receive RM2,600 per month.
• Siti's standard daily rate is RM2,600 / 26 days = RM100
• Siti's standard hourly rate is RM100 / 8 hours = RM12.50

If Siti works overtime on a normal working day

Here's an example of Siti's overtime compensation if they work beyond their work period on a normal workday:

• Example: Siti works an additional two hours on a normal working day outside ordinary work hours.

Their overtime hourly rate is:

RM12.50 x 1.5 = RM18.75

Their total overtime wage for that day is:

RM18.75 x 2 = RM37.50

If Siti works overtime on a rest day

Siti typically has rest days on weekends (Saturday and Sunday). Here's how they can calculate their overtime compensation for rest days in three different situations:

• Example 1: Siti works four hours on a Sunday within normal working hours. Thus, they receive half a day's standard wage.

Their total payment for that rest day is:

RM100 / 2 = RM50

• Example 2: Siti works eight hours on another full weekend, also within their usual working hours. Thus, they receive a full day's standard wage per day.

Their total payment for the two rest days is:

RM100 x 2 = RM200

• Example 3: Siti works 11 hours on a Saturday, three hours beyond their standard working hours. They receive twice the original hourly rate for every additional hour they work outside their standard hours.

The total payment for this rest day is:

[RM12.50 x 8 hours] + [RM12.50 x 2 x 3 hours] = RM100 + RM75 = RM175

If Siti works overtime on a public holiday

Malaysia's public holidays include festivities such as Hari Raya Puasa or national days like Independence Day. The following examples show how Siti can calculate their overtime for public holidays in three different situations:

• Example 1: Siti works three hours on Hari Raya Puasa. This is within normal working days, so they receive double their hourly rate.

The total payment for that day is:

RM12.50 x 2 x 3 hours = RM75

• Example 2: Siti works 13 hours on Eid al-Fitr. These hours extend beyond their usual work hours. Thus, their overtime rate per hour is three times the ordinary rate.

Total payment for this public holiday is:

[RM12.50 x 2 x 8] + [RM12.50 x 3 x 5] = RM200 + RM187.50 = RM387.50

Overtime pay regulations in Malaysia 

Malaysia's Employment Act protects employee pay. This law sets the standard employment hours and calculation methods for overtime rates. Here's a summary of the overtime regulations:

• An employee can work overtime for a maximum of 104 hours a month.
• The legal limit for Malaysia's standard employee work hours is eight hours per day and 45 hours per week. 
• Employers typically calculate overtime per hour if employees work more than their contracted hours on a regular day.
• An employee can refuse to do overtime if their employment contract doesn't include this requirement. However, if an employee refuses to work when the contract includes overtime, this would breach employment terms. 
• Exceptions apply if you work in a managerial role or essential services, as you must comply with overtime requests even if your contract doesn't specifically include the requirement. Another exception is when a company faces an emergency, such as a pandemic, where lives are at stake. Such special situations require employees to work overtime.
• The Malaysian government requires employers to pay employees a reasonable overtime rate.
• Companies must keep records of employee overtime hours and the amount they should receive. Employers keep these records for a minimum of five years.
• If an employer fails to pay you the correct overtime rate, you can file a case with the Labour Department or create a claim with the Small Claims Tribunal.

Conclusion 

By following the employment guidelines and calculation methods for overtime pay, workers can safeguard themselves against employers who miscalculate their pay or undercharge overtime rates. Employees who work overtime should be compensated fairly, but also try to work within the standard working hours to prevent overstretching their limits. Ultimately, this motivates employees to work hard for the company. 

FAQs 

1. What is the maximum number of hours that qualify for overtime pay?
   Workers can work a maximum of four hours per day to qualify for overtime compensation.
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2. Can salaried employees receive overtime pay?
   Yes, they can. As long as these employees meet the eligibility criteria for overtime pay, they can qualify for overtime compensation.
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3. Are there different overtime pay rates for weekends and holidays?
   Yes, there are. Weekends are considered rest days and employees are entitled to 1 to 2 times their standard daily rate, depending on whether they work more than their typical working hours. If they work overtime on public holidays, their overtime rates can be between 2 to 3 times their ordinary hourly rate, also depending on whether they work longer than their typical working hours.
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4. How do I count overtime pay for part-time employees?
   The calculation method for part-time employees' overtime is the same as for full-time workers, provided the employee fits the eligibility requirements.
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5. Are overtime pay regulations the same across different industries?
   Yes, the regulations are usually the same regardless of which industry the employee works in.
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6. What should I do if my employer refuses to pay overtime?
   Refer to your contract for confirmation of your payment rights. If your employer refuses to compensate, you can lodge a complaint with the Labour Department or the Small Claims Tribunal. Employers who fail to adhere to the Employment Act regulations regarding overtime compensation may receive fines of up to RM50,000. Companies may receive penalties for not paying employees the correct rates or refusing to pay overtime wages.
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7. Is overtime compensation mandatory, or can employers choose not to offer it?
   Yes, overtime requirements are mandatory under Malaysia's Employment Act 1955. Failure to follow them can result in employers receiving penalties.