Step-by-Step Guide to Overtime Calculation for Professionals in Malaysia

What Is Overtime Under Malaysian Labour Law

Overtime (OT) under the Labour Law of Malaysia refers to the work that is done beyond the normal working hours as per the Employment Act of 1955. Generally, the standard working hours in Malaysia are 8 hours/day or 45 hours/week. Any hour worked beyond this limit qualifies for overtime pay, which has a higher pay rate than that paid on normal working days.

This ensures that the employees are accurately paid for the extra work hour contributions and protects them from underpayment of any kind. The pay rates vary depending on when the extra hours are worked: normal working days, rest days, or public holidays.

Normal Working Hours and Overtime Pay 

Malaysian Labour Law states that employees should not work more than 8 hours per day, their total working hours should not exceed 45 hours per week, and the employees are entitled to at least one rest day per week.  Overtime Pay  Overtime pay depends on when the extra work is performed:  Normal Working Days: 

• At least 1.5 times the normal hourly rate of pay. 

Rest Days:  

• Work does not exceed half their normal hours of work: 0.5 times the normal hourly rate. 
• Work is more than half but does not exceed normal work hours: 1 time the normal hourly pay. 
• Beyond 8 hours: 2 times the normal hourly rate. 

Public Holidays: 

• First 8 hours: 2 times the normal hourly rate. 
• Beyond 8 hours: 3 times the normal hourly rate. 

Who Is Eligible for Overtime Pay in Malaysia 

It is important to note that not every employee is directly eligible for overtime pay in Malaysia. As per rules, overtime applies to: 

• Manual labourers, supervisors of manual workers, and some domestic workers, regardless of their pay. 

• Employees earning RM4,000 or below per month. 

For employees earning above this limit, the overtime terms applicable to them would be defined in their employment contracts instead. 

Step-by-Step Overtime Calculation for Malaysian Professionals 

Step 1: Ordinary Rate of Pay (ORP) Calculation: 

For monthly-paid employees:  ORP = Monthly Salary ÷ 26 days  Hourly Rate = ORP ÷ Number of working hours per day 

Step 2: Count Overtime Hours: 

Calculate how many hours were worked beyond the actual work time (usually 8 hours). 

Step 3: Apply Overtime Rate: 

Determine overtime rate based on when it is done: 

• 1.5x → Normal days 

• 0.5x / 1x / 2x→ Rest days (company policy) 

• 2x / 3x  → Public holidays (company policy) 

Step 4: Calculate Overtime Pay: 

Overtime Pay = Hourly Rate × Overtime Hours × Overtime Pay Rate 

Example Calculation: 

Say, monthly salary = RM2,600 and working hours = 8 hours/day, 

• Then ORP = RM2,600 ÷ 26 = RM100 per day, 

• Hourly rate = RM100 ÷ 8 = RM12.50 per hour, 

• For 2 hours of OT on a normal day, 

• Overtime pay = RM12.50 × 2 × 1.5 = RM37.50. 

So, the employee earns RM37.50 for 2 hours of overtime on a normal day. 

Overtime Limit in Malaysia 

The Employment Act of Malaysia ensures that the employees are not made to overwork, while also meeting the business’ operational demands.  

The General Rule is:

This limit is imposed to maintain and protect the employees’ health, productivity, and work-life balance. Note: Exceeding this limit without proper approval may result in serious non-compliance penalties.  

Conclusion: Manage Overtime Calculation Effectively 

Proper calculation of overtime pay is crucial to make sure that the employees are paid fairly. The employers should follow accurate records and calculation for OT to comply with the Malaysian Labour Law. This can also build trust between the employer and the employee, on financial terms. 

Although calculating the OT pay manually could easily lead to human errors, there is a digital solution that will easily manage records and calculations for multiple employees in different shifts: usage of reliable payroll software that is integrated with HRMS and attendance software. Info-Tech is the best option for you to easily automate the process. Schedule a demo and stay compliant. 

Overtime Calculation Malaysia FAQs