Salary Calculation: A Guide to Pay Rates in Malaysia

The Employment Act 1955 (Act 265) outlines specific guidelines for calculating both the ordinary rate of pay and the rate of pay for work performed outside normal hours. According to the Act, the ordinary rate of pay is determined based on the agreed total working hours per day in the contract of service, which should not exceed eight (8) hours per day or forty-five (45) hours per week. This establishes a standard for defining normal working hours under the law.

Ordinary Pay Rate

Under Section 60I(a) of Act 265, the "ordinary rate of pay" refers to the rate an employee receives for work performed during normal hours. This rate is calculated based on the monthly wage divided by 26 days, reflecting the average number of working days in a month.

• Monthly Rate of Pay / 26 days = Ordinary Rate of Pay per working day
• Monthly Rate of Pay / 6 days = Weekly Rate of Pay
• Hourly Rate of Pay = Ordinary Rate of Pay / Normal hours of work

Overtime Pay Rate (Working Day)

Overtime compensation is applicable for work performed beyond normal hours on working days, beginning after a cumulative spread of ten (10) hours, inclusive of breaks.

• Overtime Rate of Pay per Hour on a Working Day = Hourly Rate of Pay x 1.5

Rest Days Pay Rate

Rest days are designated to allow employees sufficient recuperation after a week’s work. Compensation for work on rest days varies based on the duration of work:

• Rest Day Rate of Pay for half a day or less = Ordinary Rate of Pay
• Rest Day Rate of Pay for more than half a day = Ordinary Rate of Pay x 2

Public Holiday Pay Rate

Employees are entitled to enhanced compensation for work performed on public holidays, set at a premium rate:

• Rate of Pay on Public Holidays = Ordinary Hourly Rate of Pay x 2
• Overtime Rate of Pay per Hour on Public Holiday = Ordinary Hourly Rate of Pay x 3

These provisions, as stipulated under Sections 60A, 60D, and others of Act 265, serve to safeguard the rights of employees regarding fair compensation for their work efforts. Employers are obligated to adhere to these guidelines to ensure compliance with labor laws and promote equitable treatment within the workplace.

By adhering to these regulations, employers uphold the principles of fairness and respect towards their workforce, fostering a conducive environment for sustained productivity and employee well-being.

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