How to Calculate Overtime Pay Accurately

Are you unsure about how to correctly calculate overtime pay according to government rules? Many companies deal with frequent overtime due to the dynamic nature of today's work environment. Don’t worry — the government has set clear guidelines on how overtime should be handled and how employees should be compensated.

To prevent misunderstandings between employers and employees, let’s take a closer look at how to calculate overtime pay based on the latest regulation issued by the Ministry of Manpower.

Components of Overtime Pay Calculation

Before diving into the calculation formula, it's essential to understand the components that form the basis of overtime pay. In practice, not all salary components are included in the calculation. So let’s break it down:

1. Basic Salary

The basic salary is the core element of an employee’s income. It is the agreed-upon compensation based on job position, responsibilities, or performance. 

The amount is typically determined by your company's internal standards and adjusted to comply with the applicable Regional Minimum Wage (UMR) or Provincial Minimum Wage (UMP).

In the context of overtime pay, the basic salary is crucial as it is used to calculate the hourly wage, which is then multiplied by the number of overtime hours and applicable overtime rate.

However, the basic salary alone does not fully represent an employee’s total income. Other components, such as allowances, also play a role.

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2. Allowances

Allowances are divided into two types: fixed and non-fixed allowances, and they play different roles in overtime pay calculation.

Fixed Allowances are paid regularly in a fixed amount every month — for example, position allowance, attendance allowance, and transportation allowance paid monthly.

Non-Fixed Allowances are irregular and vary in amount, such as daily meal money, bonuses, or performance-based incentives.

How to Calculate Overtime Pay According to the Rules

Once you understand the components involved, it’s time to learn the formula and details based on Government Regulation (PP) No. 35 of 2021. This regulation outlines how employers must compensate employees for overtime work.

Overtime Pay Calculation Basis

Overtime pay is calculated based on the monthly wage, which includes the basic salary and fixed allowances. If the basic salary + fixed allowances account for 75% or more of total monthly income, the full amount (100%) is used as the calculation base.

If the basic salary + fixed allowances are less than 75%, then the base used is 75% of the total monthly income.

If an employee’s monthly wage is below the regional minimum wage, then the minimum wage must be used as the calculation base.

Hourly Wage Calculation

According to the regulation, the formula to calculate hourly wage is:

Hourly Wage = 1/173 x Monthly Wage

The number 173 represents the average monthly working hours, based on a 40-hour workweek.

Overtime Rates on Regular Workdays

If an employee works overtime on a regular workday (Monday to Friday or Monday to Saturday), the overtime rates are:

• First hour: 1.5 x hourly wage

• Following hours: 2 x hourly wage

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Overtime Rates on Holidays or Weekly Rest Days

Calculations for holidays or weekly days off (like Sundays) depend on the employee’s weekly work schedule:

If the employee works 6 days a week (40 hours/week):

• Hours 1–7: 2 x hourly wage

• Hour 8: 3 x hourly wage

• Jam 9–11: 4 x hourly wage

If the holiday falls on the shortest workday:

• Hours 1–5: 2 x hourly wage

• Hour 6: 3 x hourly wage

• Hours 7–9: 4 x hourly wage

If the employee works 5 days a week (40 hours/week):

• Hours 1–8: 2 x hourly wage

• Hour 9: 3 x hourly wage

• Hours 10–12: 4 x hourly wage

The longer the overtime duration — especially on holidays — the higher the compensation, ensuring that employee rights are well protected.

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Overtime Pay Calculation Simulation Based on PP 35/2021 

Let’s look at a practical example to understand how the calculation works.

An employee works in a company with a 5-day workweek. Their monthly salary is IDR 5,000,000, which includes:

• Basic Salary: IDR 3.500.000

• Fixed Allowances: IDR 1.000.000

• Non Fixed Allowances: IDR 500.000

Since basic salary + fixed allowances (IDR 4,500,000) is 90% of total salary (IDR 5,000,000), the full amount (IDR 5,000,000) is used as the base.

Step 1: Calculate hourly wage

1/173 x IDR 5,000,000 = IDR 28,902

Step 2: Assume 3 hours of overtime

• 1st hour: 1.5 x IDR 28,902 = IDR 43,353

• 2nd hour: 2 x IDR 28,902 = IDR 57,804

• 3rd hour: 2 x IDR 28,902 = IDR 57,804

Total Overtime Pay = IDR 158,961

So, the employee is entitled to receive an additional IDR 158,961 for working 3 overtime hours on a regular workday.

That’s a complete guide on how to calculate overtime pay based on PP No. 35 of 2021, from understanding salary components, hourly wage formulas, to applying the correct rates depending on the type of workday.

However, these calculations are only effective when supported by competent employees and a robust HR system. Accuracy and fairness in workforce management depend heavily on the quality of your human resources and support systems. 

That’s why partnering with a trusted manpower provider like SOS can be a strategic move to bring in employees with a strong work ethic and professionalism that aligns with your company’s operational needs.

Maximize Business Productivity with Reliable Manpower from SOS

After learning how to properly calculate overtime pay, it’s time to ensure your company’s HR system operates more efficiently. 

If you'd rather focus on growing your business without the hassle of recruitment, training, and managing employees, partnering with a professional manpower provider is the smart move.

SOS is here to support your operational needs — from administrative staff to skilled workers. With years of experience and high industry standards, SOS is ready to help boost your company’s productivity and efficiency.

Get in touch with us via WhatsApp now and discover the best manpower solutions to take your business to the next level!