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How to
Calculate
Overtime Pay
for Employees
in Malaysia

Blog · September 2, 2021 · By Nicholas K

Disclaimer: This article should not be considered

to be legal advice, and altHR is not liable for
any actions taken based on this article.

Depending on your industry, overtime pay may

make up a large chunk of your company’s
payable remuneration to your employees every
month. There are a variety of simple overtime or
payroll calculators available online, but as
employers, you need to understand the rules
and regulations behind overtime pay
calculations.

Did you know, for example, that not all

employees are covered by the Employment Act
1955? Here’s a non-exhaustive list of those
governed by the Act:

Employees who earn monthly wages of

RM2,000 or less.
Employees who — regardless of monthly
wage — are engaged in manual labour.
Domestic servants.
And other categories of employees within
the First Schedule of the EA 1955.

This means that there are two categories of

employees with regards to overtime pay in
Malaysia: employees who are covered by EA
1955, and those who are not. For the latter,
overtime hours and calculations for the latter
group depend on the terms and conditions
agreed upon in their respective employment
contracts.

So — how do you calculate overtime pay for

employees, according to the Employment Act
1955?

What is overtime
pay, exactly?
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.

Naturally, the next question here would be: what

are “normal hours” of daily work? It’s fairly
straightforward: the normal hours of work is
usually agreed upon in the contract of service —
although these daily hours should not exceed a
couple of limits, according to S.60A(1):

(a) more than five consecutive hours without a

period of leisure of not less than thirty minutes
duration;

(b) more than eight hours in one day;

(c) in excess of a spread over period of ten hours

in one day;

(d) more than forty-eight hours in one week.

Additionally, it’s important for employers to note

that there is a hard limit to overtime work.
According to the Employment (Limitation of
Overtime Work) Regulations 1980, employees in
Malaysia are only allowed to work overtime for
a total of one hundred and four hours in any
one month. This comes up to an average of
under four daily overtime hours per calendar
month, so you’ll need to keep a close eye on all
your employees’ total hours.

How to calculate
overtime rate in
Malaysia?
There are a number of different rates that you’ll
need to be aware of: Normal, Rest Day, and
Public Holiday(s). Here’s a quick breakdown of
the rates as per the EA 1955, as well as a couple
of examples to help you understand the
calculations a little better.

i) Normal work days

According to S.60A(3)(a) of the Act, employees

shall be paid a rate of at least 1.5x their
hourly rate for any overtime work outside the
agreed upon hours of work — regardless of
whether they are paid a monthly or daily rate of
remuneration.

Example A: Monthly salary

Monthlysalary:RM1,800
Normalworkinghours:8hours/day
Overtime:10hours
Ordinaryrateofpay(daily)=Monthlysalary
26

RM1,800
26

= RM69.23

Hourlyrateofpay=Ordinaryrateofpay(daily)
Normalworkinghoursperday

= RM69.23
8hours

RM8.65

Overtimeearnings =HourlyrateofpayXovertimehoursX1.5
=RM8.65X10hoursX1.5
=RM129.75

For example, an employee who works

normal working hours of 8 hours a day
earns a monthly salary of RM1,800. Over
the course of the month, they have also
worked overtime for a total of 10 hours.
To calculate the employee’s ordinary
hourly rate of pay, you’ll first need to
calculate their ordinary rate of pay (daily).
To do this, divide the monthly salary by 26
days; RM1,800 / RM26 = RM69.23
Then, take the daily rate and divide that
figure by the number of hours to get the
employee’s hourly rate; RM69.23 / 8
hours = RM8.65
And finally, to calculate the overtime pay
rate for a normal work day, multiply the
employee’s hourly rate of pay by 1.5, and
then multiply that figure with the number of
overtime hours worked. Here, this would
be RM8.65 x 1.5 hours x 10 hours =
RM129.75.

Example B: Daily salary

An employee works normal working hours

of 8 hours a day, earning RM50 on a
daily basis. One day, this employee works
overtime for a total of 2 hours.
Divide the employee’s daily salary by the
number of normal working hours per day;
RM50 / 8 hours = RM6.25.
Then, calculate the overtime pay rate by
multiplying the hourly rate by 1.5, and then
multiply that figure with the number of
overtime hours worked. Here, this would
be RM6.25 x 1.5 x 2 hours =
RM18.75

ii) Rest days

Rest days are calculated based on Section 60(3)

of the Employment Act 1955. The Act provides
that every employee shall be allowed a single
rest day per week, at least, and if employees
have more than a single rest day, the final day
shall be considered to be the rest day in this
regard.

This means that for employees working regular

days of Monday to Friday, Sunday shall be
considered the rest day.

Calculating overtime pay rate for rest days can

be a little bit more complicated than overtime
pay for a normal day. Here are a couple of
scenarios that you might encounter:

Scenario A: Monthly salary

Employees on monthly salaries are entitled

to be paid half of their ordinary rate
of pay for the day’s work if the period of
work does not exceed half their
normal hours of work.
If the employee has worked for more
than half of their normal hours of work —
without exceeding the normal hours of
work for the day — they shall be entitled to
one day’s wages at the ordinary rate of
pay.

Scenario B: Daily or hourly salary

Employees on salaries that are paid daily,

hourly, or other similar rates of pay, are
entitled to one day’s wages at the
ordinary rate of pay if they work on a rest
day for hours not exceeding half their
normal hours of work.
If the employee works for over half the
normal hours for the day — without
exceeding the normal hours of work —
they shall be entitled to two days’
wages at the ordinary rate of pay.

Scenario C: Overtime work in excess of

normal working hours

Any work that is carried out in excess of

the normal hours of work on a rest day
— whether the employee is remunerated
on a monthly or daily basis — will entitle
the employee to overtime pay of twice
their hourly rate of pay.

iii) Public holidays

All employees covered by the Employment Act

1955 are entitled to paid holidays for ten
gazetted public holidays; if the holidays fall on a
rest day, the next working day immediately
thereafter will be a paid holiday instead.

If your employees are required to work overtime

on a public holiday as per S.60D of the Act, they
are entitled to overtime pay of at least 3 days’
wages at the ordinary rate of pay. This applies
to all employees as per the act, including
monthly, daily, and hourly-paid workers; the
employees in question will also receive their
ordinary pay, on top of the overtime pay.

Meanwhile, if the employee in question works

hours that are in excess of their normal
hours of work on a public holiday, this work
shall be paid at 3 times the ordinary hourly rate
for that employee.

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