
Malaysia: A Fast-Growing Market with New Rules for Businesses
Malaysia is one of the most exciting markets in ASEAN offering many opportunities for businesses to grow.
Starting February 2025, Malaysia increased the minimum wage to RM1,700, which applies to all workers, including foreign employees. Also, the 2025 Malaysia Budget, announced on October 18, 2024 introduced a new Self-Employment Social Security Scheme, where the government will cover up to 70% of contributions. A total of RM100 million has been set aside for this.
To benefit from these changes and follow the rules, companies must be careful when it comes to hiring staff, applying for visas, and managing payroll.
For many growing businesses in Malaysia, overtime pay can become a major cost. But figuring out how to calculate overtime can be confusing and time-consuming.
This quick guide will help you understand how overtime pay works and how to calculate it correctly in Malaysia.
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Understanding Overtime Laws in Malaysia
The main law for employment in Malaysia is the Employment Act 1995 (EA 1995). A new update took effect on 1 January 2023. Now, the law applies to all employees no matter how much they earn. However some parts of the law don’t apply to those earning more than RM 4,000 per month.
Here are the key rules about working hours and overtime in Malaysia:
Maximum working hours: Employees can work up to 45 hours per week (not including lunch or break times). Any hours beyond this are counted as overtime.
Overtime limit: Employees can do up to 104 hours of overtime per month, which is about 3.5 hours per day.
For regular office workers (non-shift workers): If you work 8 hours a day, 5 days a week, the maximum overtime is 4 hours per day.
For shift workers: They may work more than 8 hours a day or more than 45 hours a week, but their average work hours over 3 weeks must not go over 45 hours per week.
Break time: Workers must get at least a 30-minute break for every 5 hours worked.
Overtime pay rate: On a normal working day, overtime must be paid at a rate of at least 1.5 times the hourly wage.
How to Calculate Overtime Pay in Malaysia on Regular Working Days
In Malaysia, when an employee works overtime on a normal working day they must be paid 1.5 times their hourly wage. This rule applies whether the employee is paid daily or monthly.
Find the daily pay
- Divide the monthly salary by 26 (Malaysia uses 26 working days to calculate pay).
- Example: RM 1600 ÷ 26 = RM 61.53
Find the hourly rate
- Divide the daily pay by the number of normal working hours (usually 8 hours).
- Example: RM61.53 ÷ 8 = RM7.69 per hour
Calculate the overtime pay
- Multiply the hourly rate by 1.5 then multiply by the number of overtime hours.
- Example: RM7.69 × 1.5 × 10 hours = RM115.35
Overtime Pay on Rest Days in Malaysia: Simple Explanation
Under Malaysia’s Employment Act, every employee must get at least one rest day per week. If an employee has more than one rest day, the last rest day of the week is used when calculating overtime pay.
If you work less than half of your normal hours on a rest day, you get half a day’s pay.
If you work more than half (but not more than full) of your normal hours, you get a full day’s pay.
Overtime Payment Calculation with Example:
Monthly Salary = RM1200
Normal Working Hours = 8 hours/day
Overtime Hours on Rest Day = 3 hours (less than a full workday)
Step 1: RM1200 ÷ 26 working days = RM46.15 per day
Step 2: Half-day pay = RM46.15 ÷ 2 = RM23.07
So, the employee should be paid RM23.07 for working 3 hours on a rest day.
Conclusion
Both employers and employees need to know how to calculate overtime pay. This helps make sure workers are paid fairly when they work extra hours.
First, find the daily pay by dividing the monthly salary by 26 working days. Then, figure out the hourly rate by dividing the daily pay by the number of normal working hours. On regular workdays, overtime pay is 1.5 times the hourly rate. Different rules and rates apply if you work on rest days public holidays, or special days. Knowing how to calculate this helps employers follow the law and ensures employees get the right pay for their extra work.
FAQs
Who is entitled to overtime pay in Malaysia?
Employees covered under the Employment Act 1955 and earning RM4,000 or less per month are entitled to overtime pay. However, some companies may offer overtime benefits to all employees regardless of salary.
What is the overtime pay rate on normal working days?
Employees must be paid 1.5 times their hourly wage for overtime on regular working days.
How is the hourly pay rate calculated?
Divide the monthly salary by 26 to get the daily rate.
Divide the daily rate by normal working hours (usually 8 hours) to get the hourly rate.
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