Labour Laws: Who is Entitled to Overtime Pay in Malaysia?

Extended work hours have become the prevailing standard in contemporary times, especially within the cultural context of Malaysia. The prevalence of working beyond regular hours has surged in response to the global economic downturn triggered by the Covid-19 pandemic, causing numerous business proprietors to grapple with financial survival.

Many businesses explicitly outline within employment contracts that employees could potentially be obligated to extend their work hours beyond the customary duration to fulfill the demands of employers and/or clients.

This prompts a pertinent inquiry: “What precisely constitutes overtime?” and ‘Who is Entitled to Overtime Pay in Malaysia?”. Let’s find out below!

What is Overtime Pay?

Overtime pay is a type of payment made to employees who work beyond their normal working hours. It is usually paid at a higher rate than the normal hourly rate to compensate employees for their extra effort and time spent at work.

Moreover, overtime work is regulated by law in Malaysia, and employers are required to pay their employees overtime pay for work done beyond their normal working hours, subject to certain conditions.

The 2022 Amendment – Employment Act 1955

In 2022, the Malaysian government introduced an amendment to the Employment Act 1955 that expanded the scope of employees who are entitled to overtime pay. Prior to the amendment, only employees earning less than RM2,000 per month were entitled to overtime pay.

However, the amendment increased this threshold to RM4,000 per month. This means that more employees in Malaysia are now entitled to overtime pay.

Additionally, certain industries, such as banking and finance, have specific overtime pay regulations. Domestic servants and gardeners are also entitled to overtime pay if they work beyond their normal working hours, with the conditions and rates differing from those for other employees.

Who is Entitled to Overtime Pay in Malaysia?

Now that we understand what overtime pay is and the recent changes in the law, let’s take a closer look at who is entitled to overtime pay in Malaysia. According to the Employment Act 1955, the following employees are entitled to overtime pay:

1. Employees Earning Less than RM4,000 per Month

As mentioned earlier, the recent amendment to the Employment Act 1955 increased the threshold for employees who are entitled to overtime pay from RM2,000 to RM4,000 per month.

This means that all employees who earn less than RM4,000 per month are entitled to overtime pay if they work beyond their normal working hours.

2. Employees in Certain Industries

In addition to the income threshold, certain industries are also subject to specific overtime pay regulations. The industries that have specific overtime pay regulations in Malaysia include banking and finance, insurance, hotel and catering, and road transport.

Employees in these industries are entitled to overtime pay as per their industry-specific regulations, regardless of their income level.

3. Domestic Servants and Gardeners

If domestic servant works beyond their regular working hours, they are entitled to overtime. Similarly, gardeners in Malaysia are also entitled to overtime pay if they work beyond their regular working/normal hours.

Their entitlement to overtime pay is governed by the Employment Act 1955, and the rates are the same as those for other employees.

It is important to note that the conditions and rates for overtime pay for domestic servants and gardeners may differ from those for other employees.

Therefore, it is crucial for employers to understand and comply with the specific regulations governing overtime pay for domestic servants and gardeners in Malaysia.

Overtime Pay Rates and Calculations

Overtime pay rates in Malaysia are calculated based on the number of hours an employee works beyond their regular working hours, and the rates differ depending on the day and time of work.

The rates for overtime pay are specified in the Employment Act 1955, and employers are required to pay their employees overtime pay according to these rates.

The overtime pay rates for work done beyond regular working hours on normal working days are at least one and a half times the employee’s hourly rate.

For example, if an employee’s hourly rate is RM10, their overtime pay rate for work done beyond regular working hours on normal working days would be at least RM15 per hour.

For work done on rest day and public holiday, the period of work is more than half but does not exceed the normal hours of work, Employers are required to pay overtime wages at least two times and three times the employee’s hourly rate, respectively.

For example, if an employee’s hourly rate is RM10, their overtime pay rate for work done on rest days would be at least RM20 per hour, and for work done on public holidays, their overtime pay rate would be at least RM30 per hour.

It is important to note that employers may choose to pay higher rates of overtime pay than those specified by law, but they cannot pay less than the specified rates.

Additionally, if an employee works overtime for more than 104 hours in a month, they are entitled to one day off or one day’s pay in lieu of the day off.

Calculation Example

Here is an example to illustrate the calculation of overtime pay rates:

Let’s say an employee has an hourly rate of RM15, and is required under her/his employment contract to work 8 hours a day, then they work for an additional four hours beyond their normal working hours on a normal working day.

Their overtime pay rate would be at least one and a half times their hourly rate, which would be RM22.50 per hour. Therefore, the total overtime pay they would receive for those four hours of work would be as follows:

4 hours x RM22.50 = RM90

Similarly, if the same employee works for an additional eight hours on a public holiday, their overtime pay rate would be at least three times their hourly rate, which would be RM45 per hour.

Therefore, the total overtime pay they would receive for those eight hours of work would be as follows:

8 hours x RM45 = RM360

It is the responsibility of the HR department to ensure that all employees are paid their overtime pay according to the rates specified in the Employment Act 1955.

Furthermore, HR should communicate the overtime pay rates and calculation methods to employees to avoid any confusion or misunderstandings. By doing so, employees will be more aware of their entitlements and be motivated to work harder when required.

If you are an HR professional in Malaysia looking for an easy and efficient way to calculate overtime pay for your employees, StaffAny’s overtime calculator is the perfect solution for you.

Our calculator is specifically designed to help you calculate overtime pay rates and ensure that your employees are paid accurately and on time.

With StaffAny’s overtime calculator, you can save time and reduce errors by automating the overtime pay calculation process. You can also avoid the hassle of manually calculating overtime pay rates and ensure that your employees are paid accurately.

Don’t miss out on this opportunity to simplify your HR processes – try StaffAny’s overtime calculator today!

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