How to Calculate Double and Triple Pay For Overtime

Ah, yes, overtime pay. If you run a growth-oriented company, overtime pay can and will make up a large part of the payable remuneration to your workers every month. 

Though you can Google a simple overtime calculator, you must be careful and understand Malaysia's employment law and what it says about overtime pay. 

Usually, big companies prefer to outsource their payrolls as it is a smarter option to let the pros manage the regulations and calculations. Moreover, calculating pay can quickly become complicated if you're unsure what to do. 

If you're here to check out how to calculate overtime pay, double pay, and triple pay for your workers, you've come to the right place. But first, let's understand the law surrounding overtime pay.

 

What does the law say about working hours?

In Malaysia, the primary legislation involving employment issues is the Employment Act 1995, and it applies to all workers who earn below RM2,000 per month. 

Workers who earn more than RM2,000 per month are covered under the Contracts Act 1950.

Under the Employment Act 1955, the following are the rules for regular working hours:

• Employees can work a maximum of 48 hours per week. This will soon be reduced to 45 hours once the latest amendment of the Employment Act 1955 takes effect on Jan 1, 2023. 

• Employees can work 8 hours maximum in one day if it's a six-day work week.

• They can work 9 hours per day max if it's a five-day work week.

• There must be a 30 minutes rest period for every five hours worked.

• 10 hours is the max 'spread-over' work hours if it includes rest and leisure time. 

• For continuous work like shift work, there can be 8 straight hours of work, with 45 minutes (or higher) of the paid rest period. 

 

What counts as overtime work?

In Malaysia, overtime work refers to the number of hours an employee works beyond the regular working hours. It can mean over 8 hours of work in a day or over 48 hours a week. 

But, it would be best to remember that overtime work is limited based on Employment Regulations 1980: Employees can work 104 hours a month.

On average, it translates to 4 hours of overtime work a day.

 

Determining overtime work

The overtime pay rate depends on several factors, such as:

• Whether a worker's pay is rated monthly or daily. 

• Whether they work on regular days, rest days, or public holidays. 

 

1. Overtime pay on regular days

On a regular working day, workers should be paid 1.5 times their hourly salary for overtime work. It applies whether they are paid on a daily rate or monthly.

1. Calculate the daily ordinary pay rate by dividing the employee's monthly wage by 26.

2. Divide the ordinary pay rate by the number of regular work hours to determine the hourly pay rate.

3. Calculate overtime pay: multiply the hourly rate by 1.5, then multiply the sum by the overtime hours. 

 

Calculation example for regular day's overtime pay: 

• The monthly wage is RM1,700,

• The regular working hours are 8 hours,

• The overtime work is 9 hours.

 

Monthly Salary / 26 (Normal hours of work) = Daily pay rate

RM1,700 / 26 = RM65.38

 

Daily pay rate / Regular working hours = Hourly pay rate

RM65.38 / 8 = RM8.17

 

Hourly pay rate x Overtime work hours x 1.5 = Overtime pay

RM8.17 x 9 x 1.5 = RM110.29

 

2. Overtime work on rest days (including double pay)

Under the Employment Act, employees are entitled to at least one rest day a week. If an employee has more than one rest day, the last day will be considered the rest day to calculate overtime pay.

The employer must pay half of the ordinary pay rate to employees on monthly payments for a rest day's work if the working hours do not exceed half of their regular work hours. 

For employees working regular days from Monday to Friday, Sunday will be considered the rest day. 

If a rest day's work hours surpass half the regular work hours, the employer must pay a full day's pay. 

 

Calculation example for rest day's overtime pay:

• The monthly wage is RM1,800,

• The overtime work on a rest day is 4 hours (Does not exceed half the regular working hours).

 

Monthly Salary / 26 = Daily pay rate

RM1,800 / 26 = RM69.23

 

Daily pay rate / half the ordinary rate = Hourly pay rate

RM69.23 / 2 = RM34.61

 

Hourly pay rate x Overtime work hours = Overtime pay

RM34.61 x 3 = RM103.83

 

Based on the law, the employer must pay the employee half the ordinary rate when the rest day's work hours are below the regular working hours.

Hourly or daily pay employees are entitled to one day's wages if their work hours on a rest day do not surpass half the regular work hours. 

If their rest day's work hours are over half of the regular hours (but do not surpass regular working hours), they must be paid two days' wages. 

Any overtime work over regular hours must be paid at twice the employee's hourly rate. It applies regardless of whether the remuneration is daily or monthly.

 

3. Overtime pay on public holidays (triple pay)

If a public holiday's overtime work hours do not surpass regular working hours, the rate is twice the worker's daily rate.

If a public holiday's overtime work hours surpass regular working hours, the rate is three times the worker's daily rate.

It applies whether they are paid hourly, daily, or monthly.

 

Calculation example for rest day's overtime pay:

• The monthly wage is RM1,600,

• The overtime working hours is 6.

 

If it does not surpass regular working hours:

 

Monthly Salary / 26 = Daily pay rate

RM1,600 / 26 = RM61.53

 

Daily pay rate x 2 days' pay = Overtime pay rate

RM61.53 x 2 = RM123.06

 

If it surpasses regular working hours: 

Multiply the overtime rate by the hourly rate and the number of hours worked beyond 8 hours.

• The monthly wage is RM1,600,

• The overtime working hours (beyond 8 hours) is 2.

 

Monthly Salary / 26 = Ordinary pay rate

RM1,600 / 26 = RM61.53

 

Daily pay rate / Regular working hours = Hourly pay rate

RM61.53 / 8 = RM7.69

 

Hourly pay rate x Overtime hours x Overtime rate = Overtime pay rate (Triple pay)

RM7.69 x 2 x 3 = RM46.14

 

 

Though overtime is limited and it may also be inevitable sometimes, it is a part of the job that can impact your employee's work-life balance and performance. 

Do not forget these calculations (even if you're using a calculator or HR software), so you will know if your employees are receiving the same compensation for the extra hours they have put in for your company.