Do Freelancers Get Overtime Pay and Bonuses?

Many employers hire freelancers to tap into flexible skills and manage project-based workloads. But when it comes to overtime pay and bonuses, the rules for freelancers are different from full-time or part-time employees.

Employment Status of Freelancers

Freelancers are self-employed professionals or independent contractors who provide services to clients on a project or task basis, not standard employees under an employer-employee relationship. The key legal difference is that they operate under a contract for service, rather than a contract of service.

This means freelancers are not automatically entitled to statutory benefits such as EPF, SOCSO, overtime pay, or paid leave, unless these are included in a written contract.

Overtime Pay for Freelancers

Unlike employees covered by the Employment Act 1955 and related regulations, freelancers are not legally entitled to overtime pay under Malaysian employment law. The law’s overtime provisions apply to employees under a contract of service, not independent contractors.

However, employers and freelancers can agree on extra pay or overtime-like rates within the service agreement. To avoid disputes:

Clearly define work hours, deliverables, and overtime or extra-hours rate in the contract. Suggested formula if agreed:

Overtime Pay = Overtime Hours × Hourly Rate × Overtime Rate (e.g., 1.0 or 1.5)

Including such terms makes expectations clear and avoids ambiguity.

Bonus, Allowances, and Other Benefits

Bonuses are not mandatory under Malaysian labour law for freelancers. They only apply if the contract or agreement includes them.

Any incentives or allowances must be clearly documented. Examples of what an employer may offer:

A completion bonus for meeting project objectives
Project-based allowances such as reimbursement for travel, software, internet or equipment
Loyalty or long-term collaboration incentives for recurring assignments

Sample bonus calculation: Bonus = (Agreed Project Fee × Bonus Percentage)

For example: A project fee of RM10,000 × 10% bonus = RM1,000

If you offer these perks, ensure they are spelled out in the contract, such as eligibility criteria, timing, amount, etc., must be unambiguous.

Employer’s Responsibilities

To manage freelancers correctly and avoid misclassification risks:

Use a written Service Agreement specifying: payment terms (hourly, project, milestone), extra-hours/‘overtime’ conditions (if any), scope, deadlines, rights (such as intellectual property) and termination terms.
Clarify in the agreement whether bonus or incentives apply and under what conditions.
Avoid treating freelancers like employees (for example by imposing fixed hours, using payroll deductions, or providing standard employee benefits) that may trigger misclassification and legal risk under the Employment Act.
Maintain timely and transparent payment practices. Freelancers appreciate prompt, fair payment and this builds your reputation as a good client.

FAQs

1. Are freelancers entitled to overtime pay under Malaysian law?

No, only employees under a contract of service have statutory overtime rights. Freelancers are independent contractors unless the contract specifies otherwise.

2. Can employers give bonuses or incentives to freelancers?

Yes, but only if included in the service agreement. Such incentives are discretionary and contractual, not statutory.

3. How do you calculate extra pay if a freelancer works beyond agreed hours?

If agreed in the contract, use the formula: Overtime Pay = Overtime Hours × Hourly Rate × Overtime Rate (1.0 / 1.5). Without a contract term, extra pay is by mutual agreement.

4. Do freelancers get the same benefits as part-time or full-time employees?

No. Freelancers do not automatically receive statutory benefits (EPF, SOCSO, paid leave). These apply to employees under the Employment Act.

5. Is it necessary to register freelancers under EPF or SOCSO?

Generally no, because freelancers are not employees. EPF/SOCSO registration applies to employees under contract of service.

6. What should be included in a freelancer’s contract to avoid disputes?

Scope of work, deliverables, payment terms, milestones, extra hours or overtime rate (if any), bonuses/incentives (if any), intellectual property rights, confidentiality clause, termination clause.

7. Can freelancers request payment for public holidays or weekend work?

Only if the contract states it. There is no statutory entitlement for freelancers to public holiday pay unless agreed.

Hire Part-Time Staff Without the Hassle!

Post your job on AJobThing and reach jobseekers who are actively looking for flexible part-time roles.