Introduction
Understanding overtime in Malaysia is crucial for both employers and employees to ensure compliance with local labor laws. The Employment Act 1955, along with its 2022 amendment affective from 1 January 2023, governs overtime (OT) calculations, rates, and eligibility. This comprehensive guide explains how to calculate OT pay in Malaysia, what counts as overtime, and how it applies to different employment types.
What Qualifies as Overtime in Malaysia?
Under the Employment Act 1955 (Amended 2022), an employee is entitled to overtime pay is they work:
- More than 8 hours per day
- More than 45 hours per week (reduced from 48 hours)
- On rest days or public holidays
Note: Employees earning above RM 4,000/month may be exempt from certain OT provisions unless specified otherwise.
Overtime Calculation for Monthly Employees
Overtime Pay Formula:
(Monthly Salary ÷ 26 days ÷ 8 or 7.5 hours) × OT Rate × OT Hours Worked
- Use 8 hours for a 5-day workweek
- Use 7.5 hours for a 6-day workweek
- 25 days = Average working days in a month
Learn more about payroll components and how OT pay fits into the broader salary calculation, Payroll Components & Calculations Formulas explained.
Overtime Pay Rates in Malaysia:
| TYPE | OVERTIME RATE | WHEN IT APPLIES |
|---|---|---|
| Normal Workday | 1.5x | For hours exceeding normal daily work hours |
| Rest Day (≤ ½ day) | 0.5x | If work is half or less than normal hours |
| Rest Day (> ½ day) | 1.0x | If work is more than half but not exceeding normal hours |
| Rest Day (Full Day) | 2.0x | For work exceeding normal hours on rest days |
| Public Holiday | 2.0x | For normal hours worked on a public holiday |
| Public Holiday OT | 3.0x | For hours beyond normal hours on a public holiday |
Note: Employers may use alternative formulas, but the final amount must not be lower than the statutory rate.
Example: Calculation OT Pay
Scenario: Mr. Low earns RM2,600/month and works on 2 public holidays with 5 hours of OT.
| ITEM | RATE/HOURS | AMOUNT (RM) |
|---|---|---|
| Public Holiday Pay | RM100 x 2 | RM200.00 |
| OT on Public Holiday (2 Days) | RM200 x 2 | RM400.00 |
| OT Rate on Public Holiday | RM12.50 x 3 | RM37.50/hour |
| OT on Public Holidays (5 Hours) | RM37.50 x 5 | RM187.50 |
| Total OT | RM587.50 |
After adding overtime to gross pay, you must deduct statutory contributions and other items to determine the net payable amount.
OT for Daily, Hourly & Piece-Rated Workers
For employees paid daily, hourly, or by piece-rate, the Ordinary Rate of Pay (ORP) is calculated as:
- ORP = Total wages earned (excluding rest days, PH, incentives) ÷ Total hours worked (excluding rest days & PH)
- Overtime is then paid at 1.5x, 2x, or 3x the ORP, depending on the workday type.
OT Rules for Part-Time Employees in Malaysia
2023 Update: Clearer OT treatment for part-timers added to the Act
If part-time hours are exceeded but still under full-time limits (8h/day, 45h/week):
- OT = 1.5x agreed hourly rate
If hours exceed full-time limits:
- Standard OT rates under Employment Act apply
Example:
- A part-timer is scheduled for 5 hours/day but works 7 hours
- OT Pay = 2 extra hours x 1.5 x hourly rate
Leave Entitlements Comparison (Full-Time vs Part-Time)
Note: Leave benefits apply after 12 months of continuous service.
Unpaid Leave & Salary Proration Rules
Unpaid leave is not regulated by law but is commonly practiced. Salary for incomplete month is calculated as:
Pro-Rated Salary = (Monthly Salary × Paid Days) ÷ Total Calendar Days
1.1.1. Examples: Common Scenarios Where This Applies:
1.1.2. Salary Calculation Examples:
Important Notes:
- Always use calendar days (not just working days) in the formula.
- Employers may choose more favorable calculations if beneficial to employees.
Overtime Calculation Malaysia: A Complete Guide to EA 1955 (Post-2023) 🇲🇾
The Employment (Amendment) Act 2022, effective January 1, 2023, introduced major changes to working hours and overtime calculation in Malaysia. Compliance requires understanding the new 45-hour work week and the critical RM4,000 salary threshold. This guide breaks down eligibility, calculation formulae (ORP/HRP), and statutory pay rates under the Employment Act 1955 (EA 1955).
1. Overtime Eligibility and the RM4,000 Threshold
Overtime (OT) provisions under the EA 1955 are not universal; they apply based on a mandatory dual eligibility test (salary or job scope) as per the First Schedule of the Act.
Statutory Overtime Eligibility
A. Defining "Wages" for Overtime Entitlement
The eligibility test of RM4,000 is based on the total monthly Wages as defined under Section 2 of the EA 1955. This definition includes fixed allowances but excludes payments like overtime, travel reimbursements, and annual bonuses.
The table below illustrates how different wage components impact eligibility (assuming the employee is a Non-Manual Worker):
Determining Eligibility Based on Wages
Note on Calculation: Total Wages for eligibility calculation include Basic Salary + Fixed Allowances. Variable payments (like Commission in Illus 3, or Overtime in Illus 2) are excluded when checking the RM4,000 threshold.
B. The Definition of a Manual Worker
If an employee earns above RM4,000 but falls under the Manual Worker category, they are legally entitled to all mandatory EA 1955 overtime and premium rates (as per Table 1).
The “50% Rule” for Mixed Duties: If a person is employed partly in manual labour and partly in some other capacity, they may legally be classified as a manual worker if they perform manual labour for more than 50% of their duties during any one wage period.
Statutory Overtime Eligibility
2. Defining Statutory Working Hours (The Basis for OT)
Overtime is legally defined as any hours worked in excess of the normal hours of work per day. The 2023 amendment set the new maximum normal working week.
Statutory Limits on Working Time
3. Mandatory Overtime Calculation Malaysia: ORP and HRP
Accurate overtime calculation in Malaysia depends entirely on deriving the Ordinary Rate of Pay (ORP) and Hourly Rate of Pay (HRP) using the statutory divisor.
A. Formulae (EA 1955, Section 60I)
B. Impact of the 45-Hour Week on HRP (Critical)
4. Statutory Minimum Overtime and Premium Rates
These minimum premium rates only apply to eligible employees (RM4,000 and below, or manual labour regardless of salary).
Mandatory Premium Pay Rates
Practical Overtime Calculation Exercises
Assume a normal working day is 8 hours for calculating HRP/Rest Day thresholds.
Exercise 1: Mr. AutoCount - Overtime on Public Holidays
Facts:
- Monthly Salary: RM 2,600
- Situation: Works 5 hours of overtime on 2 public holidays (beyond his normal 8-hour day).
Your Task: Calculate his total overtime pay and total monthly salary.
Exercise 2: Ms. AutoCount - Work on Rest Days
Facts:
- Monthly Salary: RM 3,000
- Situation: Works for 3 hours on each of 4 Sundays (rest days) in a month. (3 hours is less than half of the normal 8-hour day).
Your Task: Calculate her total rest day pay and total monthly salary.
Summary & Key Takeaways
Conclusion
Malaysia’s overtime laws ensure fair compensation for extra work hours. Employers must comply with the Employment Act 1955 rates, while employees should verify their OT calculations. Whether you’re full-time, part-time, or on a daily wage, understanding these rules helps protect your rights.
Need help with payroll compliance? Consult an HR expert or refer to the latest Employment Act amendments for updates.
Disclaimer
This guide is for informational purposes and is based on the provided documents and the Employment Act 1955 (post-2023 amendments). It does not constitute legal advice. Employment law in Malaysia is subject to ongoing interpretation by the courts and the Department of Labour (JTK). For specific and authoritative guidance applicable to your unique circumstances, always consult the official legislation or seek professional legal and HR consultation.
Frequently Asked Questions
Can the company compel non-manual employees above RM4,000 to work overtime without extra pay?
Yes, provided they are non-manual workers and their salary exceeds RM4,000. Under this circumstance, the sections mandating OT premiums (Sec 60, 60A, 60D) do not apply. The employer must ensure the employment contract clearly stipulates that the salary compensates for and absorbs variable working hours, thus managing any expectation for mandatory extra pay.
Is work performed after taking half-day annual leave considered overtime?
Yes. If the employee works beyond the normal finish time of their standard workday (e.g., 6:00 PM), the extra hours worked are considered overtime (OT) and must be paid at 1.5 × HRP. Overtime is triggered by work beyond the normal hours of work on that day.
What is the risk of breaching the 12-hour daily limit?
The 12-hour maximum daily work time (normal hours + OT) is a fundamental health and safety protection. Breaching this limit, outside of the five narrowly defined statutory emergency conditions, is a severe violation of the EA 1955. This carries significant legal liability and penalties.
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