How To Guide: Calculating Overtime and Special Payments

Managing employee compensation goes beyond just basic salaries. For Human Resource and Industrial Relations professionals, understanding how to accurately calculate the ordinary rate of pay, overtime and other special payments is essential to ensure compliance with labour laws and to maintain fair treatment of employees. 

Below is an overview of how to calculate the key essentials such as the ordinary rate of pay, overtime, work done on rest days and public holidays and encashment of annual leave.

Let’s take a look at some examples.

1. Ordinary Rate of Pay (ORP)

Ms Siti earns a monthly salary of RM 2,500. Therefore, her ORP is

RM 2500 / 26 = RM 96.15 

2. Hourly Rate of Pay (HRP)

The calculations for HRP can be divided into 2.

i) When the normal hours of work are constant (fixed)

Mr Jason earns a monthly salary of RM 3,000. He works 8 hours per day, 5 days a week. 

ORP = RM 3,000 / 26 = RM 115.38

HRP = RM 115.38 / 8 = RM 14.42

Mr Jason’s HRP is RM 14.42

ii) When the normal hours of work varies (not fixed)

Mrs Meena earns a monthly salary of RM 1,700. She works a total of 38 hours per week.

RM 1,700 x 12   =  RM 20,400  =  RM 10.32

38 hours x 52            1976

Ms Meena’s hourly rate of pay is RM 10.32

3. Overtime

Mr Jason has worked 4 hours overtime on Friday, 14 February 2025. His HRP is RM 14.42 (please see above for calculations for HRP).

RM 14.42 x 1.5 x 4 = RM 86.52

Mr Jason’s overtime earnings on 14 February 2025 is RM 86.52.

4. Work Done on Rest Days

For employees who work on a rest day, the calculations for payment for work done is dependent on the number of hours the employee works. 

Let’s assume an employee’s normal hours of work is 8 hours a day.

If the employee works less than 4 hours on a rest day = half a day’s work

If the employee works more than 4 hours on a rest day = full days work

i) A daily or hourly rated employee 

Mr Luke earns a daily rate of RM 60. He works 8 hours on a rest day, which is a full day’s work. His payment for work done on a rest day is

RM 60 x 2 = RM 120

ii) Monthly Rated employee

Mr Jason works on a rest day. Using the same example as above, where he earns a monthly salary of RM 3,000, his payment for work done on a rest day is

ORP = RM 3,000 / 26 = RM 115.38

ORP x 1 = RM 115.38

iii) Overtime on a Rest Day

Ms Siti’s normal hours of work is 8 hours a day. Her salary as stated above is RM 2,500. She worked for a full day on Sunday, 23rd March 2025 (Rest day) and she worked an additional 3 hours as overtime. Her overtime earnings for 23rd March 2025 are

ORP = RM 2,500 / 26 = RM 96.15 

HRP = RM 96.15 / 8 = RM 12.01

Overtime = RM 12.01 x 2 x 3 = RM 72.06

5. Work Done on Public Holidays 

Ms Sindu earns a monthly salary of RM 3,500. She worked on the first day of Hari Raya which is a designated public holiday for her organization. 

Her earnings for work done on a public holiday is

ORP = RM 3,500 / 26 = RM 134.62

RM 134.62 x 2 = RM 269.24

i) Overtime on Public Holidays

Let’s assume Ms Sindu works 4 hours overtime on the first day of Hari Raya. Her normal hours of work is 8 hours per day. Her earnings for the overtime period is

HRP = RM 134.62 (ORP) / 8 = RM 16.83

Overtime earnings = RM 16.83 x 3 x 4 = RM 201.96

6. Encashment of Annual Leave

Mr Luke’s ORP is RM 60. He has a balance of 5 unused annual leave to be encashed.

RM 60 x 5 = RM 300.

Annual leave encashment = RM 300