Overtime work is a common practice in many industries across Malaysia. With the recent amendments to the Employment Act 1955 that came into effect on 1 January 2023, it's essential to understand how overtime pay is calculated under the new regulations. This guide will help you navigate the updated overtime calculations, ensuring you receive the correct compensation for your extra hours.
What is Overtime Work?
Overtime refers to any hours worked beyond the normal working hours stipulated in your employment contract or as per the Employment Act. Under the amended Act, normal working hours are:
- Not exceeding 8 hours per day, or
- Not exceeding 45 hours per week
Any work performed beyond these hours is considered overtime and should be compensated accordingly.
Limits on Overtime Work
According to the Employment Act, there are limits on how much overtime an employee can work:
- Daily Overtime Limit: An employee shall not be required to work more than 12 hours in any one day, which includes normal working hours and overtime. Therefore, the maximum overtime hours per day are 4 hours (Section 60A(4)(a)).
- Monthly Overtime Limit: A maximum of 104 hours per month (Section 60A(7)).
Employers must adhere to these limits unless an exemption is obtained from the Director-General of Labour.
Key Changes in the Employment Act Amendments
The Employment Act 1955 has undergone significant changes, including:
- Expansion of Scope: The Act now covers all employees earning up to RM4,000 per month, increased from the previous RM2,000 threshold.
- Reduction in Maximum Working Hours: The maximum weekly working hours have been reduced from 48 hours to 45 hours.
- Maternity Leave Extended: Maternity leave has been increased from 60 to 98 days.
- Paternity Leave Introduced: Fathers are now entitled to 7 days of paid paternity leave.
Who is Eligible for Overtime Pay?
Under the amended Employment Act 1955, overtime pay is mandatory for:
- Employees earning a monthly salary of RM4,000 and below.
- Manual labor workers, regardless of their salary.
- Employees engaged in the operation or maintenance of mechanically propelled vehicles.
Employees earning above RM4,000 may not be covered under the Act but can still receive overtime pay if stipulated in their employment contract.
Overtime Rates According to the Employment Act
Here's how they are determined under the amended Act:
- Normal Working Days: 1.5 times the hourly rate.
- Rest Days:
- Work not exceeding half the normal working hours: Paid at half (0.5) day's wages at the ordinary rate of pay.
- Work exceeding half but not exceeding normal working hours: Paid at one (1) day's wages at the ordinary rate of pay.
- Overtime beyond normal working hours: Paid at two (2) times the hourly rate.
- Public Holidays:
- Work during normal working hours: Paid at two (2) times the ordinary rate of pay in addition to the holiday pay (totaling three (3) times the ordinary rate).
- Overtime beyond normal working hours: Paid at three (3) times the hourly rate.
Note: These rates are stipulated under Sections 60A(3)(a) & (b), 60C(2), and 60D(3) of the Employment Act 1955.[1]
How to Calculate Your Hourly Rate
Your hourly rate is calculated by dividing your monthly salary by the number of working days and hours:
- Hourly Rate: (Monthly Salary / 26 days) / 8 hours
Note: The number 26 represents the average number of working days in a month.
Calculating Overtime Pay: Examples
Example 1: Overtime on a Normal Working Day
Scenario: You earn a monthly salary of RM3,000 and worked 2 hours of overtime on a normal working day.
- Calculate the hourly rate:
- Hourly Rate = (RM3,000 / 26) / 8 = RM14.42 per hour
- Calculate overtime pay:
- Overtime Rate = 1.5 x RM14.42 = RM21.63 per hour
- Total Overtime Pay = RM21.63 x 2 hours = RM43.26
You should receive an additional RM43.26 for your overtime work.
Example 2: Work on a Rest Day
Scenario: You earn a monthly salary of RM3,500 and worked 10 hours on a rest day.
- Calculate the daily and hourly rates:
- Daily Wage = RM3,500 / 26 = RM134.62
- Hourly Rate = RM134.62 / 8 = RM16.83 per hour
- Determine the pay for work on a rest day:
- Since you worked 10 hours on a rest day, which exceeds normal working hours (8 hours), you are entitled to:
- Payment for normal hours (8 hours): One day's wages at ordinary rate = RM134.62
- Overtime beyond normal hours (2 hours):
- Overtime Rate: 2 x RM16.83 = RM33.66 per hour
- Overtime Pay: RM33.66 x 2 hours = RM67.32
- Since you worked 10 hours on a rest day, which exceeds normal working hours (8 hours), you are entitled to:
- Calculate Total Pay for Rest Day Work:
- Total Pay = Payment for normal hours + Overtime Pay
- Total Pay = RM134.62 + RM67.32 = RM201.94
You should receive an additional RM201.94 for your work on the rest day.
Note: The calculations are based on Sections 60A(3)(b) and 60C(2) of the Employment Act 1955.[1]
Example 3: Work on a Public Holiday
Scenario: You earn a monthly salary of RM3,500 and worked 12 hours on a public holiday.
- Calculate the hourly rate:
- Daily Wage = RM3,500 / 26 = RM134.62
- Hourly Rate = (RM3,500 / 26) / 8 = RM16.83 per hour
- Determine the pay for work on a public holiday:
- Holiday Pay: RM134.62 (daily wage)
- Work during normal hours (8 hours):
- Payment: 2 x RM16.83 x 8 hours = RM269.28
- Overtime beyond normal hours (maximum 4 hours due to daily limit):
- Overtime Rate: 3 x RM16.83 = RM50.49 per hour
- Overtime Pay: RM50.49 x 4 hours = RM201.96
- Calculate Total Pay for Public Holiday Work:
- Total Pay = Holiday Pay + Payment for work + Overtime Pay
- Total Pay = RM134.62 + RM269.28 + RM201.96 = RM605.86
You should receive an additional RM605.86 for your work on the public holiday.
Note: The calculations are based on Section 60D(3) and the overtime limits under Section 60A(4)(a) of the Employment Act 1955.[1]
Impact of Overtime Pay on Net Salary
Overtime earnings are considered part of your gross salary and are subject to statutory deductions such as:
- EPF (KWSP)
- SOCSO (PERKESO)
- EIS
- Income Tax (PCB)
Use our net salary calculator Malaysia to determine how your overtime pay affects your take-home salary after deductions.
Overtime for Employees Earning Above RM4,000
For employees earning more than RM4,000 monthly, overtime entitlements depend on the terms outlined in the employment contract. Employers are encouraged to provide fair compensation for overtime work to maintain employee morale and productivity.
Conclusion
Understanding how overtime pay is calculated under the latest regulations ensures that you're fairly compensated for your extra efforts. Be mindful of the daily and monthly overtime limits to protect your well-being. Use our tools and resources to stay informed and maximize your earnings while complying with Malaysian employment laws.
References
- Employment Act 1955 (Act 265), Sections 60A(3)(a) & (b), 60A(4)(a), 60A(7), 60C(2), and 60D(3). Available at the Ministry of Human Resources Malaysia: Employment Act 1955 PDF