Working on Overtime: An Update on Remuneration
Raja Vishnu Sivarajah, IR Law Consultant NELC 2018
Working on Overtime: An Update on Remuneration
Objectives
1) A run through on hours of work and overtime as prescribed by the law 2) Overview of industry practice on overtime 3) Inconsistencies in industry overtime rates with that prescribed by the law 4) Advise or guidelines to correct inconsistent overtime practices Application of Overtime
Applies for ‘employees’ under Employment Act 1955 (‘EA 1955’) Act [First schedule, EA 1955] covers all persons employed under a Contract of Service whereby: • Person’s wages do not exceed RM 2,000 p.m. irrespective of occupation. • Person employed in manual labour irrespective of amount wages. • Person employed in operation/maintenance of mechanically propelled vehicles. • Person supervising or overseeing other employees engaged in manual labour.
Application of Overtime (Cont’d)
• Person employed in any vessel registered in Malaysia except:- - An officer under Merchant Shipping Act of U.K. - Holder of Local Certificate under Merchant Shipping Ordinance 1952. - Person with agreement under Merchant Shipping Ordinance 1952. • Person engaged as a domestic servant. Overtime (Definition)
Employment Act 1955 (EA 1955) : Hours of work Section 60A. 3(b) • (b) In this section ―overtime‖ means the number of hours of work carried out in excess of the normal hours of work per day.
Hours of work
• Employees shall not be required to work:
- more than 8 hours a day; if less up to 9 hours on other days (This means that the hours of hours of work in a day excluding meal breaks is eight hours) - more than 48 hours per week. Section 60A(1) Hours of work
S.60A(9) Definition Of Hours Of Work (does not include meal break)
• Hours of work is defined as the time during which the employee is at the disposal of the employer and is not free to dispose of his own time and movements. If the employee is permitted to leave the premises during his meal break, that break would not be part of his hours of work.
Hours of work (cont’d)
S.60C Shift Work (Exception)
• An employee who is engaged in shift work may be required to work more than eight hours in one day provided that the average number of hours worked over three weeks or any period exceeding three weeks, does not exceed forty eight hours per week. Overtime (Definition)
Employment Act 1955 (EA 1955) : Hours of work Section 60A. 3(b) • (b) In this section ―overtime means the number of hours of work carried out in excess of the normal hours of work (does not include meal break) as agreed under employment contract. • Example:
• Normal hours of 9.00am-6.00pm (Mon-Fri) as stated in the employment contract, then overtime shall be the hours of work (with superior’s approval) before 9.00am or after 6.00pm
Overtime (based on EA 1955)
- Work in excess of normal hours of work. - Rate of payment 1½ times the hourly rate of pay (normal working day) – Section 60A, EA 1955 - Limited to 104 hours a month (Employment (Limitation Of Overtime Work) Regulations 1980. - Work done on rest days and gazetted holidays not overtime.-Section 60A(3)&(4) Overtime: Based on Employment Act 1955
Working on normal day or Work during normal Normal pay rate (1 day rate) Saturday (off-day) - Section work hours 60A, EA 1955 (9.00am-6.00pm)
OT (beyond 6.00pm) 1.5 hourly rate
Working on Sunday (Rest-day) For work during ½ day rate – Section 60 EA 1955 normal work hours (below 4 hours) For work during 1 day rate normal hours (above 4 hours) For OT (beyond 2x hourly rate 6.00pm) Working on Public Holiday (PH) For work (even for 2 days’ rate + holiday pay (1 – Section 60D, EA 1955 one hour work) day’s rate) during normal work hours
For OT (beyond 3x hourly rate 6.00pm)
Overtime (industry practice) Manufacturing, SMEs, construction industry as examples: Work done on rest days and gazetted holidays treated as overtime – overpayment (double rate) and inconsistent with Section 60A(3)&(4) Example: Work on Rest day (Sunday) 9.00am - 6.00pm (Industry practice rate: 8hrs x 2times hourly rate)
Inconsistent with EA 1955 as work done on rest days and gazetted holidays not overtime – Section 60A(3)&(4) Overtime (industry practice – cont’d) Manufacturing, SMEs, construction industry as examples: Work done on public holidays treated as overtime. Example: Work on public holiday 9.00am - 6.00pm (Industry practice rate: 8hrs x 3x hourly rate) Inconsistent with EA 1955 as work done on rest days and gazetted holidays not overtime - Section 60A(3)&(4)
Effect of inconsistent overtime industry practice) 1) Increased costs – Employers not keen to award annual increments for fear of increased costs in overtime. 2) Trade disputes (non compliance under s. 56, IR 1967 Act) for failure to comply to article on annual increment 3) Employees deliberately slowing down work in order to complete job assignments during overtime 4) Excessive MCs after work on rest days and public holidays 5) Breach of Employment (Limitation Of Overtime Work) Regulations 1980 (limitation of 104 hours overtime a month) 6) Low basic salary (to counter high overtime rates) thereby relying more on foreign workers HR Suggested Solution (to overcome effect of inconsistent practices)
1) Revamp overtime rates for new joiners, to be more consistent with EA 1955 (to provide other incentives for work on rest days and public holidays to make such work attractive if EA 1955 rates are perceived to be too low) 2) More lucrative basic wages to lure Malaysian workers (less reliance on foreign workers) once overtime rates have been revamped 3) Set target oriented incentives to achieve productivity without overtime (example monthly company sponsored dinner when targets have been met without overtime)
THE END
Thank you