Must-know Malaysia Leave Types and Overtime Pay Rates

Editor’s note: ‘Must-know Malaysia Leave Types and Overtime Pay Rates’ is an article written by Nan An and further updated by Hern Yee from Talenox.

The Malaysian GDP grew at an average of 6.5% per annum for almost 50 years, complemented by its amazing geographic location and multilingual mix of Malay, Indian and Chinese populace. The labour laws in Malaysia are created to suit various races; hence, there are a myriad of Malaysia leave types and practices that employers should know about.

Some examples of leave entitlements include holiday leave, annual leave, sick leave, maternity leave, and public holidays such as Deepavali. We will also talk about the various overtime entitlements for employees covered under the Employment Act. 

Before we dive right into the different Malaysia leave types and overtime pay rates in the statute, here some technical terms to take note of.

General terms to note

“Employee”

According to the Employment Act (1955), an “employee” is:

• Anyone whose salary is not more than RM2000 per month under a contract of service with an employer; or 
• Any manual worker, regardless of monthly pay, under a contract of service with an employer.

So, what about employees with a monthly salary that is beyond RM2000? Such employees are not covered under the Employment Act.

But fret not! These employees simply need to check their employment contract terms regarding leave and overtime rates, and not be afraid to negotiate the terms with their potential employer, if needed. It would be good for these employees to ensure that the leave entitlement and overtime rates are similar to or better than the Employment Act stipulations.

For all other employees, the EA is a reference point for establishing the terms and conditions of employment. However, it is an influential reference; hence, any changes will significantly impact the general employment T&Cs across the private sector in Malaysia. 

“Ordinary rate of pay”

This refers to an employee’s daily wage. When an employee receives a monthly rate of pay, the ordinary rate of pay should calculate accordingly:

Monthly rate of pay / No. of work days in the relevant month

So, when an employee works 8 hours a day for a monthly salary of RM2,600, he/she will have an ordinary rate of pay of RM100 (= Monthly salary / 26 = RM2,600 / 26 = RM100).

“Hourly rate of pay”

When an employee works 8 hours a day for a monthly salary of RM2,600, the same employee’s hourly rate of pay would be RM12.50. This calculated according to the following formula:

Ordinary rate of pay per day / Normal working hours per day =
RM100 / 8 hours = RM12.50

Malaysia Leave Types

Let’s firstly go through the introduction of the different Malaysia leave types for employees in both the private sector and public sector.

Annual Leave in Malaysia 

According to the Employment Act (1955), an employee in Malaysia is entitled to the following paid annual leave days:

Do note that a paid annual leave day would require the company to pay the employee by his/her ordinary rate of pay.

If an employee has not completed 12 months of continuous work with the same employer, his entitlement to annual leave should be calculated in direct proportion to the number of completed months of service. 

How to calculate leave entitlement?

Let’s say an employee has applied for a total number of annual leave days that is not a whole number. If the total number of annual leave days for the year is, for example, 6.5 days, the half-day should be disregarded; in other words, the total number of annual leave days, in that case, should round up to six days.  

Now, what if the total number of annual leave days is, for example, six-and-three-quarters? If that fraction of a day is more than half a day,  you can round it up to one day; in other words, the total number of 6 ³/4 annual leave days should round up to a total number of 7 days.

Other statutory considerations

An employee needs the company to approve his/her annual leave application before taking time off. If this condition is not fulfilled, the employee is not entitled to go on annual leave.

In the event that an employee falls sick while on such annual leave, he/she can request the employer to cancel the annual leave and accept a sick leave application instead.

What if the employee receives his/her monthly wages without any reduction from annual leave? In that case, the employee has technically and rightfully received his annual leave pay.

Maternity Leave in Malaysia

Maternity leave is a period of paid absence that a working mother is entitled to utilise – before and after the birth of her child

According to the Employment Act (1955), when a working mother needs to give birth, she should be given a minimum of 60 consecutive paid maternity leave days when she has been:

• Employed at any time during the past 4 months before her confinement
• Employed for a period of, or periods amounting in the aggregate to, not less than 90 days during the past 9 months before her confinement.

As of April 2022, The Employment (Amendment) Bill 2021 has increased paid maternity leave to 98 calendar days. It also includes protection against dismissal during pregnancy or in the events of post-birth complications.

While the Employment Act (1955) extends maternity provisions to all female employees (not just low-paid workers and their supervisors), the Employment (Amendment) Bill 2021 eliminates this extension. Thankfully, the Malaysian government is expecting to restore this extension via ministerial guidance during a review of the EA’s earnings ceiling.

Don’t forget that the paid maternity leave policy will only apply to a female employee for her first five childbirth. 

How to calculate leave entitlement?

A working mother can apply for maternity leave 30 days ahead of her expected confinement day. This means that this leave type is not eligible for application earlier than that.

What if a female employee is unfit for work due to an advanced state of pregnancy? In this case, the employee may need to begin her maternity leave earlier. In order to be eligible for advanced maternity leave, she would need to fulfil the following conditions:

1. Apply for maternity leave 14 days ahead of her confinement date
2. Get certified for earlier maternity from a medical officer or registered medical practitioner that is either:
   • appointed by the employer, if any;
   • or any other registered medical practitioner / medical officer in the event that the employer does not appoint a medical practitioner within a reasonable time or distance.

A company can extend new mothers’ maternity leave beyond 60 days, but these would be without pay. 

Working mothers in the public sector can receive 90 days of maternity leave; the public sector includes banks, some state governments and several multinational companies.

Other statutory conditions

Do note that a company cannot:

• Fire a female employee from her employment; or
• Send a notice of termination;

during the period in which she is entitled to maternity leave.

While on paid maternity leave, a working mother is entitled to any of the following salary disbursement options from her company – whichever offers her more:

• Her Ordinary Rate of Pay per Maternity Leave Day
• A Rate of Pay prescribed by the Minister per Maternity Leave Day

Moreover, a working mother should notify her company of her upcoming maternity leave within 60 days before her expected confinement date. If she were to go on maternity leave without notifying her employer, the employer may suspend the employee’s maternity allowance until the appropriate notice is given to her company. 

There may be instances in which a working mother needs to make last-minute arrangements to urgently tend to her child while on annual leave. In this case, she can submit a maternity leave application to her company and request to cancel the initial annual leave application.

Paternity Leave in Malaysia

Previously, the statue does not cover paternity leave; hence, new fathers in Malaysia were not entitled to paid paternity leave. Companies had to offer paternity leave based on their own policy. In fact, it was common for private sector companies to offer 1-3 days of paid paternity leave.

Thankfully, The Employment (Amendment) Bill 2021 now introduces seven consecutive days of paid paternity leave (for up to five births) for married male employees.

If an employee needs to extend his paternity leave period, some companies would allow that in the form of unpaid leave as well. In addition, a public sector employee often enjoys 7-14 days of paternity leave, depending on his company’s policy.

Sick Leave in Malaysia

When an employee is unwell and therefore unfit for duty, he/she is entitled to paid sick leave. This allows the employee to rest at home.

Do note that sick leave should be certified by a medical doctor who appointed by the employer in accordance with statutory requirements. Otherwise, any other registered medical practitioner or medical officer can certify the employee’s sick leave; the statute allows this in the event that the employer does not appoint a medical practitioner within a reasonable time or distance.

How to calculate leave entitlement?

According to the Employment Act (1955), if an employee is sick but does not need hospitalisation, he/she would be entitled to the following paid sick days:

*The number of Sick Leave Days is in the aggregate in each calendar year.

However, if the employee’s condition requires hospitalisation, he/she is entitled to a paid sick leave period for a maximum of 60 days each year.

In regards to paid sick leave entitlement, the employer should pay the Ordinary Rate of Pay per paid sick leave day to the employee. 

For example, when an employee is paid a monthly salary of RM1,170 and applied for a 4-day sick leave, then how does one calculate his remuneration during sick leave?

Ordinary rate of pay =
Monthly rate of pay / No. of work days in the relevant month =
RM1,170 / 26 = RM45

Sick leave payment =
Ordinary rate of pay x days of sick leave =
RM45 x 4 = RM180

Other statutory conditions

But please note in the following situations, an employee’s sick leave application is not valid when the leave is not:

• Certified by a registered medical practitioner, medical officer or a dental surgeon 
• Relayed to the employer within the first 48 hours of the employee’s sick leave period

Overtime Calculation in Malaysia

When an employee exceeds his/her normal working hours, that counts as working overtime. But how do we define “normal working hours” in Malaysia?

Previously, according to the Employment Act, the maximum number of normal working hours per workday was 8 hours; that’s because a workweek was 48 hours with six working days per week. 

Now, The Employment (Amendment) Bill 2021 has reduced the normal six-day work week from 48 hours to 45 hours.

In addition, agricultural and/or industrial companies cannot have female employees work within the hours of 10:00 pm to 5:00 am; this limitation is in place for the female employees’ general safety.

Companies should note that the maximum number of overtime hours to require out of an employee is 104 hours per month. Hence, employers cannot require any employee to work more than 12 hours in one day, no matter the situation.

Normal Working Days‘ Overtime Rates

According to the Employment Act, employees who work overtime on a Normal Working Day should be paid 1.5 x hourly rate of pay. 

For example, let’s say Kenneth is paid a monthly salary RM1,950 to work 7.5 hours per Normal Working Day. Over the course of 26 work days for the month, his ordinary rate of pay* would be:

Monthly salary / No. of work days in the relevant month =
RM1950 / 26 = RM75

From there, his hourly rate of pay** would be:

Ordinary rate of pay per day / Normal working hours per day =
RM75 / 7.5 = RM10

In this case, his overtime rate would be:

1.5 x Hourly rate of pay =
1.5 x RM10 = RM15 per hour

When he clocks in 10 hours for a Normal Working Day, that counts as an additional 2 hours of work. His overtime pay, in that case, should amount to:

Hours of overtime x overtime rate =
1.5 x RM10 = RM15 per hour

What if Kenneth receives a daily wage instead? Let’s say his daily salary is RM75 and he works 7.5 hours per day. His ordinary rate of pay* would be calculated as:

Ordinary rate of pay per day / Normal working hours per day =
RM75 / 7.5 = RM10

When he clocks in 10 hours for a Normal Working Day, this counts as an additional 2 hours of work. Thus, his overtime rate would be:

1.5 x Hourly rate of pay =
1.5 x RM10 = RM15 per hour

From there, he would be paid:

Hours of overtime x overtime rate =
2 hours overtime work x RM15 = RM30

Rest / Non-Working Days‘ Overtime Rates

Employees are entitled to one rest day per week. Of course, an employee typically works a standard 5-day workweek, which has more than one rest day.

When an employee works from Monday to Friday, the rest day that’s valid for overtime compensation would be a Sunday (i.e. the last day of the employee’s rest days).

So how do we calculate overtime rates for rest days? Keep in mind the number of normal work hours in Malaysia is a maximum of 8 working hours per day.

Public Holidays‘ Overtime Rates

When an employee has to work on a public holiday and the hours follow normal working hours, he/she should be paid a 2-day wage at an ordinary rate of pay.

For example, let’s say Kenneth is paid a monthly salary of RM1,300 to work 8 hours per Normal Working Day. Over the course of 26 workdays for the month, his ordinary rate of pay would be:

RM 50 = RM1300 / 26

Thus, his hourly rate of pay would be:

RM6.25 = RM50 / 8

In this case, if he has to work for 4 hours on Nuzul Al-Quran Day, his overtime rate would be:

RM12.5 per hour = 2 x RM8

He is then entitled to:

RM50 = 4 x RM12.5

What if an employee works beyond the normal working hours on a Public Holiday? If Kenneth has to work for 10 hours (i.e. 2 hours more than the normal working hours) on Nuzul Al-Quran Day (i.e. a Public Holiday in Malaysia), he would be entitled to an overtime payment of RM137.50. This amount is calculated using the following formula:

(3 x hourly rate of pay) x (the number of hours in excess of 8 hours) + 2 days wages at the ordinary rate of pay =
(RM6.25 x 3) x (10 – 8) + (8 x RM6.25 x 2) = RM137.50

Feeling overwhelmed with the statutory details?

Staying up-to-date with Malaysia’s employment regulations can be hassle-free! There are online HR tools like Talenox to help your company stay compliant in regard to leave entitlement, overtime compensation, Borang E filing, and more.

The Talenox Leave module also comes preset with local public holidays and Malaysia leave types.

Intrigued? Learn more about the Talenox Leave module available in the SUITE plan or try it out in a 30-day free trial for yourself.