Have you ever wondered how overtime is calculated? Or are confused when it comes to talking about various overtime calculations?
In this article, we will provide a comprehensive overview of various overtime calculations, and we will use easy-to-follow examples to guide you through each step. By the end, you will have a clear understanding of how to calculate overtime pay in Malaysia seamlessly.
To start, we will need to understand two fundamental calculations: Ordinary Rate of Pay and Hourly Rate of Pay.
Ordinary Rate of Pay (ORP)
ORP is the daily rate at which an employee is compensated for their work.
Calculation: Monthly Wages / 26 days
Hourly Rate of Pay (HRP)
HRP is the hourly rate at which an employee is compensated for their work.
Calculation: ORP / Normal Hours of Work per day
Note: Normal hours of work per day should exclude break time. i.e: 9am to 6pm is 8 normal hours of work with 1 hour break, hence 8 hours is used for calculation.
For the Overtime (OT) examples, we will refer to the above ORP and HRP for the calculation.
There are various rates that you’ll need to know: Normal Working Day, Rest Day, and Public Holiday(s). Here's a simple explanation of these rates according to the Employment Act 1955, along with some examples to make the calculations easier to understand.
1. Normal Working Day Overtime
Whenever employees are needed to work overtime (hours outside the agreed upon hours), they shall be paid a rate of at least 1.5x their HRP per hour.
Note: Overtime only begins once the hour spread exceeds 10 hours (8 Normal hours of work + 2 break hours)
2. Rest Day Overtime
Whenever employees (employed on a weekly/monthly rate of pay) are needed to work overtime on their rest day. There are three scenarios to consider:
If the period of work does not exceed half their normal hours of work, they shall be paid ½ ORP.
If the period of work is more than half but does not exceed their normal hours of work, they shall be paid 1 ORP.
Whenever employees are needed to work in excess of normal hours of work on their rest day, they shall be paid 1 ORP and 2x HRP per hour.
3. Public Holiday Overtime
Whenever employees are needed to work overtime on a Public Holiday that does not exceed their normal hours of work, they shall be paid 2x ORP. Whenever employees are needed to work in excess of normal hours of work on a Public Holiday, they shall be paid 2x ORP and 3x HRP per hour.
Note: Companies will only need to pay Public Holiday OT on Public Holidays that the company is observing.
Important Note:
According to EA 1955, overtime is applicable for employees who are earning a monthly wage less than RM4,000 per month.
It’s also important for companies to take note that employees cannot work overtime exceeding 104 hours in any one month.
Still unclear about the calculation of overtime or want to learn more? Do not hesitate to reach out to us at 📞+603 7887 9889 or drop us an email 📩info@synergy-outsourcing.com
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