Overtime refers to hours worked beyond the standard working hours. In Malaysia, the Employment Act 1955 (Act 342) defines these standard hours as eight hours per day or 45 hours per week. Any work performed beyond these hours, on non-working days, or during public holidays is considered overtime. Employers must understand and comply with overtime regulations to ensure fair compensation for employees and legal compliance. Before January 1, 2023, the maximum weekly working hours for both non-shift and shift employees under the Employment Act were capped at 48 hours. From January 1, 2023, this limit was reduced to 45 hours per week for all employees covered by the Act, regardless of whether they work fixed or rotational shifts. Employers are legally required to pay overtime wages for work exceeding these limits.
Can employees refuse to work overtime in Malaysia?
The answer is yes. Employees have the right to refuse overtime work if it is not explicitly outlined in their employment contract or if they have not previously agreed to it. The Employment Act 1955 provides guidelines on working hours and overtime, but unless an employment contract or collective agreement mandates overtime, employees are not legally obligated to work beyond their regular hours. However, if overtime is stipulated in the employment contract or if it is part of a collective agreement, employees may be required to work additional hours. Refusal to work overtime under these circumstances could potentially lead to disciplinary action, depending on the terms of the contract or agreement. It is essential for both employers and employees to clearly understand and agree on the terms related to overtime work to avoid misunderstandings and ensure fair practices.
What is the Maximum of Overtime Hours?
The Employment Act stipulates that employees should not work more than 104 hours of overtime in a month. This limit is crucial to prevent employee burnout and ensure a healthy work-life balance.
Employees are entitled to additional pay for overtime work, typically 1.5 times the hourly rate on weekdays and double the rate on rest days and public holidays.
What is Overtime Pay?
Overtime pay refers to the additional compensation an employee receives for working beyond their regular working hours. It serves as an incentive for employees to put in extra effort and acknowledges the sacrifices they make by dedicating more time to their job.
What’s the Overtime Pay Rate and How to Calculate OT Pay?
Overtime pay is calculated based on the employee’s ordinary rate of pay and the number of overtime hours worked. The ordinary rate of pay is the employee’s basic salary divided by the normal working hours per month.
Formula for Overtime Compensation Rate Calculation
When calculating overtime pay, we should start from ORP and HRP:
- ORP (Ordinary Rate of Pay) = Monthly Rate of Pay ÷ 26
- HRP (Hourly Rate of Pay) = ORP ÷ 8
OT compensation rate differs from normal working days, rest days and public holidays. Here’s details:
Who is Exempted from Overtime Pay in Malaysia?
1. Employees with a Monthly Salary Exceeding RM4,000
Under the latest changes to the Employment Act 1955, only employees earning less than RM4,000 per month are entitled to receive overtime pay. Employees whose monthly salaries exceed RM4,000 are generally not eligible for overtime compensation for extra hours worked.
However, those earning above RM4,000 per month are exempted from certain provisions, including:
- Overtime rates for rest days
- Overtime rates outside working hours
- Allowances for shift-based work
- Overtime on public holidays
- Overtime for half working days on holidays.
2. Workers in Specific Industries
Certain industries in Malaysia have their own regulations for overtime pay. For employees working in sectors like banking and finance, insurance, hotel and catering, and road transport, the industry-specific rules govern their eligibility for overtime pay, regardless of their salary level.
Conclusion
Overtime pay is a crucial component of employment in Malaysia, regulated by the Employment Act. By understanding these regulations and the proper calculation methods, employers can ensure that their employees are fairly compensated for their additional work, while staying compliant with the law. Employees, in turn, should be informed of their rights and entitlements regarding overtime pay to safeguard against potential exploitation.
Complying with overtime pay regulations is not just about meeting legal requirements—it also contributes to a positive work environment, enhancing employee satisfaction and productivity.
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