Overtime Pay in Malaysia: Employment Act Rates and How to Calculate OT

Who is entitled to statutory overtime

Since 1 January 2023 the Employment Act 1955 covers every employee with a contract of service, regardless of salary. But the First Schedule carves out the pay-related provisions: the statutory overtime, rest-day and public-holiday premium rates (sections 60, 60A, 60C and 60D) do not apply to employees whose wages exceed RM4,000 a month.

• Wages of RM4,000 a month or below — you are legally entitled to the statutory OT rates below, and the employer cannot contract out of them.
• Wages above RM4,000 a month — overtime is contractual. Whatever your employment contract, handbook or company policy says is what you get; there is no statutory floor, and "no OT for executives" is lawful.
• The Act applies to Peninsular Malaysia and Labuan. Sabah and Sarawak have their own Labour Ordinances with broadly similar but separately drafted overtime rules — check the right ordinance if you work there.
• "Wages" for the RM4,000 test means basic pay and fixed allowances, excluding overtime itself, bonuses, travel claims and employer statutory contributions.

Normal hours: 8 a day, 45 a week

Overtime means work beyond your normal hours. The Act caps normal working hours at 8 hours a day and 45 hours a week — the weekly figure was reduced from 48 to 45 by the Employment (Amendment) Act 2022. You also cannot be required to work more than 5 consecutive hours without a break of at least 30 minutes, and you are entitled to at least one rest day per week (that entitlement applies to everyone, even above RM4,000; only the premium pay rate is limited).

If your contract sets shorter normal hours — say 7.5 a day for a 5-day week — hours worked beyond your contractual normal hours, up to 8, are usually paid at the plain hourly rate, with the 1.5× premium applying beyond that. Many employers simply pay 1.5× beyond contractual hours; that is more generous than the statute and perfectly lawful.

The two rates everything is built from

Before you can apply any multiplier you need two derived figures. For a monthly-rated employee:

• Ordinary rate of pay (ORP) = monthly wages ÷ 26. The 26 is fixed by the Act — it represents the working days in a month after rest days, and it does not change if the month has 28 or 31 days.
• Hourly rate of pay (HRP) = ORP ÷ normal hours of work per day (normally 8).
• So on RM2,600 a month: ORP = RM100 a day, HRP = RM12.50 an hour.
• Only wages count in that RM2,600 — not overtime already earned, not the annual bonus, not reimbursed claims.

The statutory multipliers

Which multiplier applies depends on what kind of day you worked, not just how many hours:

Worked example

An employee earns RM2,600 a month, works 8 normal hours a day, and in one month does three hours of overtime on a weekday, five hours on a rest day, and a full normal day on a public holiday. ORP is RM100 and HRP is RM12.50.

Weekday OT: 3 hours × 1.5 × RM12.50 = RM56.25. Rest day: five hours is more than half of eight, but not beyond eight, so it is one day's wages = RM100 (had it been four hours or fewer, it would be RM50). Public holiday: within normal hours, so two days' wages at ORP = RM200, paid in addition to the holiday pay already inside the monthly salary.

Total overtime and premium pay for the month is RM356.25, on top of the RM2,600 basic. That is roughly a 14% uplift on gross pay — and every ringgit of it is subject to the usual deductions before it reaches the bank account.

The 104-hour monthly limit

Overtime is capped at 104 hours in any one month under the Employment (Limitation of Overtime Work) Regulations 1980. That works out to roughly four hours a day across a 26-day month. Exceeding the limit is an offence by the employer, not the employee, and does not void your right to be paid for the hours you actually worked. Exemptions exist for genuine emergencies, essential services and work whose interruption would cause damage.

Overtime must also be paid on time — the Employment Regulations require it to be paid no later than the last day of the wage period following the one in which it was earned. It cannot be rolled up indefinitely or swapped for time off without your agreement.

How overtime is taxed and deducted

Overtime is ordinary employment income, and unlike an annual bonus it is not treated as a one-off:

• EPF — yes. Overtime is wages for EPF, so your 11% and the employer's 12% or 13% both apply to it.
• SOCSO and EIS — yes. Overtime is included in contribution wages, up to the RM6,000 monthly insured-wage ceiling.
• PCB — yes. Overtime raises that month's gross, so the monthly tax deduction rises with it. Because payroll annualises your pay, a heavy OT month can push the PCB up more than the extra tax you will actually owe for the year; any over-deduction comes back as a refund when you file.
• The practical effect: for someone already in the 19% band, close to a third of overtime pay is diverted to EPF and PCB before it lands — though the EPF share is still your money.

Common disputes worth knowing about

• "Our company doesn't pay OT" — unenforceable for an employee earning RM4,000 or below. Section 60A entitlement cannot be waived by contract.
• Dividing monthly pay by 30 instead of 26 to compute the daily rate. This understates every OT payment by about 13% and is a common payroll error, not a policy choice.
• Counting allowances out of the ordinary rate. Fixed allowances that form part of wages should be inside the figure you divide by 26; only genuine reimbursements sit outside it.
• Being told OT was "absorbed" into a flat allowance. A fixed OT allowance is only lawful if it is at least what the statutory calculation would have produced for the hours actually worked.
• If a claim cannot be resolved internally, the route is a complaint to the Labour Department (Jabatan Tenaga Kerja) under section 69 of the Act.

Important caveats

This is a general explanation of the Employment Act 1955 as amended, not legal advice, and it covers Peninsular Malaysia and Labuan — Sabah and Sarawak are governed by their own Labour Ordinances. The RM4,000 threshold, the 45-hour week and the 104-hour overtime cap are the figures currently in force; thresholds are amended from time to time by order, so confirm against the current Act, your employment contract and the Labour Department before relying on a number. Once you know your OT-inflated gross for the month, use the calculator below to see what actually reaches your account after EPF, SOCSO, EIS and PCB.