Working

on Overtime: An
Update on Remuneration

Raja Vishnu Sivarajah,

IR Law Consultant
NELC 2018

Working on Overtime: An Update on

Remuneration
Objectives

1) A run through on hours of work and overtime as

prescribed by the law
2) Overview of industry practice on overtime
3) Inconsistencies in industry overtime rates with that
prescribed by the law
4) Advise or guidelines to correct inconsistent overtime
practices
 Application of Overtime
Applies for ‘employees’ under Employment Act 1955
(‘EA 1955’) Act [First schedule, EA 1955] covers all
persons employed under a Contract of Service
whereby:
• Person’s wages do not exceed RM 2,000 p.m.
irrespective of occupation.
• Person employed in manual labour irrespective of
amount wages.
• Person employed in operation/maintenance of
mechanically propelled vehicles.
• Person supervising or overseeing other employees
engaged in manual labour.

Application of Overtime (Cont’d)

•  Person employed in any vessel registered in
Malaysia except:-
- An officer under Merchant Shipping Act
of U.K.
- Holder of Local Certificate under
Merchant Shipping Ordinance 1952.
- Person with agreement under Merchant
Shipping Ordinance 1952.
•  Person engaged as a domestic servant.
 Overtime (Definition)

Employment Act 1955 (EA 1955) : Hours of work

Section 60A. 3(b)
• (b) In this section ―overtime‖ means the
number of hours of work carried out in excess of
the normal hours of work per day.

Hours of work
•  Employees shall not be required to work:

- more than 8 hours a day; if less up to 9 hours on
other days (This means that the hours of hours of
work in a day excluding meal breaks is eight hours)
- more than 48 hours per week.
Section 60A(1)
Hours of work
S.60A(9) Definition Of Hours Of Work (does not
include meal break)

• Hours of work is defined as the time during which the

employee is at the disposal of the employer and is not
free to dispose of his own time and movements. If the
employee is permitted to leave the premises
during his meal break, that break would not be
part of his hours of work.

Hours of work (cont’d)

S.60C Shift Work (Exception)

• An employee who is engaged in shift work may be required to

work more than eight hours in one day provided that the
average number of hours worked over three weeks or any
period exceeding three weeks, does not exceed forty eight
hours per week.
Overtime (Definition)
Employment Act 1955 (EA 1955) : Hours of work
Section 60A. 3(b)
• (b) In this section ―overtime means the number of hours of
work carried out in excess of the normal hours of work (does
not include meal break) as agreed under employment contract.
• Example:

• Normal hours of 9.00am-6.00pm (Mon-Fri) as stated in the

employment contract, then overtime shall be the
hours of work (with superior’s approval)
before 9.00am or after 6.00pm

Overtime (based on EA 1955)

- Work in excess of normal hours of work.
- Rate of payment 1½ times the hourly rate
of pay (normal working day) – Section 60A, EA 1955
- Limited to 104 hours a month
(Employment (Limitation Of Overtime Work)
Regulations 1980.
- Work done on rest days and
gazetted holidays not overtime.-Section
60A(3)&(4)
 Overtime: Based on Employment Act 1955
Working on normal day or Work during normal Normal pay rate (1 day rate)
Saturday (off-day) - Section work hours
(9.00am-6.00pm)
60A, EA 1955

OT (beyond 6.00pm) 1.5 hourly rate

Working on Sunday (Rest-day) For work during ½ day rate

– Section 60 EA 1955 normal work hours
(below 4 hours)
For work during 1 day rate
normal hours (above
4 hours)
For OT (beyond 2x hourly rate
6.00pm)
Working on Public Holiday (PH) For work (even for 2 days’ rate + holiday pay (1
– Section 60D, EA 1955 one hour work) day’s rate)
during normal work
hours


For OT (beyond 3x hourly rate
6.00pm)

Overtime (industry practice)

Manufacturing, SMEs, construction industry as
examples:
Work done on rest days and gazetted
holidays treated as overtime – overpayment (double
rate) and inconsistent with Section 60A(3)&(4)
Example:
Work on Rest day (Sunday) 9.00am - 6.00pm
(Industry practice rate: 8hrs x 2times hourly rate)

Inconsistent with EA 1955 as work done on rest days and

gazetted holidays not overtime – Section 60A(3)&(4)
Overtime (industry practice – cont’d)
Manufacturing, SMEs, construction industry as
examples:
Work done on public holidays
treated as overtime.
Example:
Work on public holiday 9.00am -
6.00pm (Industry practice rate: 8hrs
x 3x hourly rate)
Inconsistent with EA 1955 as work done on rest
days and gazetted holidays not overtime - Section
60A(3)&(4)

Effect of inconsistent overtime industry

practice)
1) Increased costs – Employers not keen to award annual
increments for fear of increased costs in overtime.
2) Trade disputes (non compliance under s. 56, IR 1967 Act) for
failure to comply to article on annual increment
3) Employees deliberately slowing down work in order to complete
job assignments during overtime
4) Excessive MCs after work on rest days and public
holidays
5) Breach of Employment (Limitation Of Overtime Work)
Regulations 1980 (limitation of 104 hours overtime a month)
6) Low basic salary (to counter high overtime rates) thereby relying
more on foreign workers
HR Suggested Solution (to overcome effect
of inconsistent practices)

1) Revamp overtime rates for new joiners, to be more consistent

with EA 1955 (to provide other incentives for work on rest days
and public holidays to make such work attractive if EA 1955 rates
are perceived to be too low)
2) More lucrative basic wages to lure Malaysian workers (less
reliance on foreign workers) once overtime rates have been
revamped
3) Set target oriented incentives to achieve productivity without
overtime (example monthly company sponsored dinner when
targets have been met without overtime)

THE END
Thank you