Employment Law: Calculation for Payment of Overtime Work
Employment Law: Calculation for Payment of Overtime Work

Employment Law: Calculation for Payment of Overtime Work

It must first be understood that the entitlement for overtime pay under the Employment Act 1955 is only applicable to employees with wages not exceeding RM2000 a month or those falling within the First Schedule of Employment Act 1955.

The laws in this respect are spelled out in the Employment Act 1955 (“the EA”).

The pay for overtime work shall be at a rate of not less than 1 ½ time of the employee hourly rate of pay.

Hourly rate of pay’ 

  • means the daily or ordinary rate of pay divided by the normal hours of work as agreed between the employers and employees – Section 60I(1)(b) EA.

Ordinary rate of pay

  • means wages as defined in Section 2 of the EA calculated by the month, which an employee is entitled to receive under the terms of his contract of service for the normal hours of work for one day – Section 60I(1)(a) EA.
  • The ordinary rate of pay on a monthly basis shall be calculated according to the following formula: monthly rate of pay/26 days – Section 60I(1A) EA.

Section 2(1) defined ‘wages’ as means basic wages and all other payments in cash payable to an employee for work done in respect of his contract of service but does not include–

(a) the value of any house accommodation or the supply of any food, fuel, light or water or medical attendance, or of any approved amenity or approved service;

(b) any contribution paid by the employer on his own account to any pension fund, provident fund, superannuation scheme, retrenchment, termination, lay-off or retirement scheme, thrift scheme or any other fund or scheme established for the benefit or welfare of the employee;

(c) any traveling allowance or the value of any traveling concession;

(d) any sum payable to the employee to defray special expenses entailed on him by the nature of his employment;

(e) any gratuity payable on discharge or retirement; or

(f) any annual bonus or any part of any annual bonus.

Besides the above, do note that Section 60I(1)(b) EA also provide that such wages shall exclude any payment made under an approved incentive payment scheme or any payment for work done on a rest day or on any gazetted public holiday granted by the employer under the contract of service or any day substituted for the gazetted public holiday.

For detail on the laws governing the hours of work and overtime work. Kindly refer to Hours of Work and Overtime Work in Malaysia.

About the Author

This article was written by Chia Swee Yik, Partner of this Firm, who has provided advice on employment law.

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