Managing overtime correctly is one of the most important payroll responsibilities for Malaysian employers. Get the calculations wrong and you risk underpaying your employees, which can result in employee complaints, Department of Labour audits, and legal liability under the Employment Act 1955.
This guide breaks down everything employers need to know about overtime pay in Malaysia, including who qualifies, the correct rates, how to calculate overtime accurately, and the changes introduced by the 2022 Employment Act Amendment.
What Is Overtime Under the Employment Act 1955?
Overtime refers to any work performed beyond the normal working hours stipulated in an employee’s contract. Under the Employment Act 1955, the standard working hours in Malaysia are a maximum of 8 hours per day and 45 hours per week. Any work exceeding these limits qualifies as overtime and must be compensated at the statutory rates set out in the Employment Act 1955.
It is important to note that break times are not counted as working hours. Employees are entitled to a minimum 30-minute break after working 5 consecutive hours. For example, an employee working from 8:00 AM to 5:00 PM with a one-hour lunch break has a total working time of 8 hours, excluding the break.
For a more detailed explanation of statutory working hours, rest periods, and employer obligations, see our Labour Law Malaysia Working Hours guide.
Who Is Eligible for Overtime Pay in Malaysia?
Not all employees are automatically entitled to statutory overtime pay under the Employment Act 1955. Eligibility depends on the employee’s monthly salary.
Employees earning up to RM4,000 per month are covered under the Employment Act 1955 and are entitled to statutory overtime pay at the prescribed rates.
Employees earning above RM4,000 per month are not automatically covered under the EA for overtime purposes. However, they may still be entitled to overtime if it is clearly stated in their employment contract. Employers should ensure employment contracts for higher-earning employees clearly address overtime arrangements to avoid disputes.
What Are the Standard Working Hours in Malaysia?
Under the Employment Act 2022 Amendment, effective from 1 January 2023, the maximum working hours in Malaysia were reduced from 48 hours per week to 45 hours per week.
| Working Hours Limit | Maximum |
| Per Day | 8 hours |
| Per Week | 45 hours |
| Consecutive Hours Without Break | 5 hours |
| Minimum Break Duration | 30 minutes |
This change applies to all employees covered under the Employment Act 1955. Employers who have not updated their employment contracts or internal HR policies to reflect the 45-hour weekly limit should do so immediately to remain compliant.
Overtime Pay Rates in Malaysia
The rate of overtime pay in Malaysia depends on when the overtime is worked. There are three categories: normal working days, rest days, and public holidays.
| Type of Day | Rate |
| Normal Working Day | 1.5 times the Hourly Rate of Pay (HRP) |
| Rest Day (work not exceeding half normal hours) | 0.5 times the Ordinary Rate of Pay (ORP) |
| Rest Day (work exceeding half normal hours or full day) | 1 times the Ordinary Rate of Pay (ORP) |
| Public Holiday | 2 times the Hourly Rate of Pay (HRP) |
Employers must pay at least these minimum rates. Paying above the statutory minimum is permitted and may be included in the employment contract as a benefit to attract talent.
How to Calculate Overtime Pay in Malaysia
Overtime calculation in Malaysia is based on two key figures: the Ordinary Rate of Pay (ORP) and the Hourly Rate of Pay (HRP).
Step 1: Calculate the Ordinary Rate of Pay (ORP)
ORP = Monthly Salary divided by 26
The 26-day divisor is the standard under the Employment Act, based on the average number of working days per month excluding one rest day per week. This is one of the most common points of confusion among employers, as some mistakenly use 30 days as the divisor.
Step 2: Calculate the Hourly Rate of Pay (HRP)
HRP = ORP divided by Normal Working Hours Per Day
For most employees, this is 8 hours per day.
Step 3: Apply the Relevant Overtime Rate
Multiply the HRP by the applicable overtime rate and the number of overtime hours worked.
Worked Example:
- Monthly Salary: RM3,000 Normal Working Hours: 8 hours per day
- ORP = RM3,000 / 26 = RM115.38 HRP = RM115.38 / 8 = RM14.42
- Overtime on a Normal Working Day (2 hours): RM14.42 x 1.5 x 2 = RM43.27
- Overtime on a Public Holiday (2 hours): RM14.42 x 2 x 2 = RM57.69
Employers may use alternative formulas, but the final amount must not be lower than the statutory minimum rate under the Employment Act 1955.
Maximum Overtime Hours Allowed in Malaysia
The Employment Act 1955 sets a cap on how much overtime an employee can work. The maximum allowable overtime is 104 hours per month.
Employers cannot compel employees to work beyond this limit without prior approval from the Director-General of Labour. Requiring employees to work excessive overtime beyond the statutory limit is an offence under Malaysian labour law and can result in penalties for the employer.
From a workforce management perspective, consistent overtime close to the 104-hour limit is also a strong signal that the team is understaffed and additional headcount should be considered.
When hiring additional employees, businesses should also ensure that employment documentation is properly prepared and compliant, including stamping employment contract requirements where applicable. This helps employers maintain proper records and reduce administrative risks throughout the employment lifecycle.
Overtime for Rest Days and Public Holidays
Rest Days
Every employee is entitled to at least one rest day per week. If an employer requires an employee to work on a rest day, specific overtime rates apply as outlined in the table above.
If work on a rest day does not exceed half the employee’s normal working hours, the employee is entitled to half a day’s ORP. If work exceeds half the normal hours or covers a full day, the employee is entitled to a full day’s ORP.
Public Holidays
Employees who work on a gazetted public holiday are entitled to their normal public holiday pay plus overtime at 2 times the HRP for hours worked. This is one of the highest-cost overtime scenarios for employers and should be factored into workforce planning during peak periods and festive seasons.
Malaysia gazetted public holidays include 11 mandatory national holidays annually, with additional state-specific public holidays depending on location.
Common Mistakes Employers Make With Overtime in Malaysia
Using the wrong divisor Many employers divide monthly salary by 30 instead of 26 when calculating ORP. This underestimates the daily rate and results in underpayment of overtime, which is a compliance violation.
Not updating contracts after the 45-hour amendment Some employers are still operating on the old 48-hour weekly limit. Employment contracts that have not been updated to reflect the 45-hour maximum introduced in January 2023 are non-compliant.
Assuming salaried employees above RM4,000 are not entitled to any overtime While the EA does not automatically cover employees earning above RM4,000 for overtime, if the employment contract includes overtime provisions, those terms are still legally binding.
Failing to keep accurate overtime records Employers are required to maintain records of hours worked and overtime paid. Poor record-keeping makes it difficult to defend against employee claims and Department of Labour investigations.
Compelling employees to work beyond 104 overtime hours per month This is a direct violation of the Employment Act 1955 and exposes the employer to legal penalties regardless of whether the employee agreed to it.
Conclusion
Overtime compliance is a non-negotiable part of managing a workforce in Malaysia. Understanding the correct rates, applying the right formula, and keeping accurate records protects your business from legal risk and builds trust with your employees.
If your team is consistently working close to the 104-hour overtime limit every month, it is often a sign that your business needs additional headcount rather than more hours from the same people. Overworked teams experience higher turnover, lower productivity, and increased burnout, all of which cost more in the long run than hiring the right people.
Trust Recruit Malaysia helps employers across manufacturing, IT, banking, construction and services find and place the right talent at the right time. Whether you need to scale your team quickly or fill a specialist role, our consultants are ready to support your hiring needs.
Contact Trust Recruit Malaysia today and let us help you build a dream team.
FAQs
Employees earning up to RM4,000 per month are covered under the Employment Act 1955 and entitled to statutory overtime pay at the prescribed rates. Employees earning above this threshold may still be entitled to overtime if it is stipulated in their employment contract.
Overtime is calculated using the Ordinary Rate of Pay (ORP = Monthly Salary / 26) and the Hourly Rate of Pay (HRP = ORP / normal hours per day). For overtime on a normal working day, the rate is 1.5 times the HRP. Rest days and public holidays carry higher rates.
Under the Employment Act 1955, employees cannot work more than 104 overtime hours per month. Employers cannot compel employees to exceed this limit without approval from the Director-General of Labour.
Employees who work on a gazetted public holiday are entitled to overtime pay at 2 times their Hourly Rate of Pay (HRP) for hours worked, in addition to their normal public holiday entitlement.
Employers can require employees to work overtime under reasonable business circumstances, but cannot exceed the legal limit of 104 hours per month. All overtime must be compensated at the correct statutory rates under the Employment Act 1955.