In the dynamic and demanding world of work, many employees in Malaysia often find themselves putting in extra hours to meet deadlines and fulfil job responsibilities. As they invest their time and effort beyond their regular working hours, it becomes crucial to understand how overtime pay is calculated to ensure fair compensation for their dedication.
In this article, we will explore the concept of overtime in Malaysia, delve into the relevant laws governing overtime, and provide insights into calculating overtime pay for different types of days. Let’s get started!
What is Overtime?
Overtime, in the context of employment, refers to the additional hours an employee works beyond their standard working hours. As per the Employment Act (EA) 1995 in Malaysia, this Act applies to employees whose monthly salary is below RM 2000. For those earning more than RM 2000, their rights are covered under the Contracts Act 1950.
The EA 1995 defines the rules for normal working hours, which are as follows:
- Workers can work up to 48 hours per week for a maximum of three weeks.
- In a six-day workweek, employees can work up to 8 hours in one working day. For a five-day workweek, the maximum daily working hours are nine.
- A rest period of 30 minutes should be given for every five hours of work.
- The “spread over” work hours, including rest and leisure time, should not exceed 10 hours.
- For continuous work, such as shift work, employees can work 8 consecutive hours along with 45 minutes or more of paid rest period.
Read more: Can Employee Refuse to Work Overtime in Malaysia?
Malaysia Law On Overtime
In Malaysia, overtime work is defined as the number of hours an employee works beyond their normal working hours, which can be more than 8 hours in one day or over 48 hours in a week. However, the Employment Regulations 1980 place limitations on the amount of overtime work an employee can perform.
According to these regulations, employees can only work up to 104 hours of overtime in one month, averaging approximately 4 hours of overtime work per day.
It is crucial for employers and employees alike to be aware of these limitations to ensure compliance with the law and safeguard the well-being of the workforce.
Read more: Understanding How to Calculate Salary per Day?
The Benefits of Overtime for Employers
Employers may find certain advantages to allowing or requiring overtime work in certain situations. Here are some potential advantages of overtime for employers:
1. Increased Productivity
Overtime can lead to increased productivity as employees have more time to complete tasks or projects. This can be particularly beneficial when there are tight deadlines or high workloads.
2. Meeting Deadlines
Overtime allows employers to meet tight deadlines or handle unexpected peaks in workload without hiring additional staff. This flexibility can be crucial in industries with fluctuating demands.
3. Cost Savings Compared to Hiring
In some cases, paying overtime may be more cost-effective than hiring additional employees, especially if the need for extra labor is temporary or sporadic.
4. Employee Flexibility
Overtime provides flexibility for employees who are willing and able to work extra hours. This flexibility can contribute to employee satisfaction and retention.
5. Maintaining Continuity
Overtime can help maintain continuity in operations, especially in industries where certain tasks require specific knowledge or skills. Having existing employees work overtime can prevent disruptions caused by turnover or hiring delays.
While overtime can offer these advantages, it’s essential for employers to carefully manage and monitor overtime to prevent potential downsides, such as employee burnout, increased labor costs, and potential legal issues related to labor regulations. Additionally, employers should be mindful of the impact on work-life balance and employee well-being when considering and managing overtime hours.
Read more: Understanding How to Make a Shift Roster
How to Calculate Overtime Rate in Malaysia?
Calculating overtime pay in Malaysia can be determined by several factors, such as whether an employee’s pay is monthly rated or daily rated and the type of day on which the overtime work is performed, whether normal days, rest days, or public holidays. Let’s explore the calculation methods for each category:
1. Normal Days
For regular working days, employees are entitled to overtime pay at a rate of 1.5 times their hourly rate. This calculation applies to both employees paid on a daily rate and those on a monthly basis. To compute the overtime rate for normal days, follow these steps:
- Step 1: Calculate the Daily Ordinary Rate of Pay
Begin by dividing the employee’s monthly salary by 26 (the average number of working days in a month) to obtain the daily ordinary rate of pay.
Example:
Monthly Salary = RM 1600
Daily Ordinary Rate = RM 1600 / 26 = RM 61.53
- Step 2: Determine the Hourly Pay Rate
Next, divide the daily ordinary rate of pay by the number of normal work hours in a day to find the hourly pay rate.
Example:
Hourly Pay Rate = RM 61.53 / 8 = RM 7.69
- Step 3: Calculate Overtime Pay
Finally, calculate the overtime pay by multiplying the hourly pay rate by 1.5 and then multiplying this figure by the number of overtime hours worked.
Example:
Overtime Pay = RM 7.69 (hourly rate) x 10 (overtime hours) x 1.5 = RM 115.35
Read more: Basic Salary in Malaysia and Its Regulations
2. Rest Days
Rest days are essential for employees to rejuvenate and strike a balance between work and personal life. Under the Employment Act in Malaysia, every employee is entitled to a minimum of one rest day per week.
If an employee is granted more than one rest day, the last day of the week is considered the official rest day for calculating overtime pay.
For employees on a monthly pay basis, the calculation of overtime pay on rest days depends on the number of hours worked. If the work hours on a rest day do not exceed half of their normal work hours, the employer must pay them half of their ordinary pay rate.
On the other hand, if the work hours on a rest day exceed half of their normal work hours, the employer must pay them a full day’s pay.
To better understand the overtime calculations for rest days, let’s take an example:
Monthly Salary: RM 1200
Normal Work Hours: 8 Hours
Overtime Hours on a Rest Day: 3 Hours (Not Exceeding Normal Work Hours)
- Step 1: Calculate the Ordinary Daily Rate
To find the ordinary daily rate, divide the monthly salary (RM 1200) by the number of working days in a month. If we consider an average of 26 working days in a month, the ordinary daily rate will be:
RM 1200 / 26 = RM 46.15
- Step 2: Determine Overtime Pay
According to the regulations, when the work hours on a rest day are below the normal working hours, the employee must be paid half of the ordinary rate. Therefore:
Half of the Ordinary Rate: RM 46.15 / 2 = RM 23.07
Read more: 11 Factors to Consider When Scheduling Staff
3. Public Holidays
When employees work overtime on public holidays without exceeding their normal working hours, they are entitled to receive two days’ pay at ordinary rates, regardless of their remuneration frequency.
Example:
If an employee’s hourly rate is RM 10, and they work 5 hours of overtime on a public holiday:
Overtime Pay = 2 (ordinary days’ pay) x RM 10 (hourly rate) x 5 (overtime hours) = RM 100
However, if the employee’s working hours on a public holiday exceed their normal working hours, they are entitled to receive three times their ordinary hourly rate for the additional hours.
Example:
If the employee’s normal hourly rate is RM 10, and they work 8 hours on a public holiday (2 hours beyond normal working hours):
Overtime Pay = 3 (ordinary hourly rate) x RM 10 (hourly rate) x 2 (additional hours) = RM 60
In conclusion, understanding how overtime pay is calculated for employees in Malaysia is vital for ensuring fair compensation and compliance with the Employment Act. However, calculating overtime pay manually can be time-consuming and complex, especially when considering different types of overtime pay.
That’s where StaffAny’s overtime calculator in Malaysia comes in handy. With this powerful tool, employers can effortlessly calculate overtime pay for both hourly and monthly workers, taking into account various types of overtime. Try out StaffAny’s overtime calculator today and streamline your overtime management effortlessly!
