The HRD Corp levy in Malaysia, explained
HRD Corp, formerly HRDF, collects a monthly levy from registered Malaysian employers for employee training. Registration is mandatory for covered industries with ten or more Malaysian employees at the standard rate, commonly 1% of wages, and optional at five to nine employees at a reduced rate, commonly 0.5%. The balance funds approved training claims.
What HRD Corp is
The Human Resource Development Corporation operates under the Pembangunan Sumber Manusia Berhad Act 2001. It collects the levy, holds it per employer, and administers the schemes through which employers claim training costs back.
The scheme originally covered manufacturing and a limited set of service sectors. Coverage was expanded substantially in 2021 to reach most industries, so many SMEs that were previously outside it became liable. If your last check on this was before that expansion, check again.
Who is liable, and the headcount thresholds
Two things decide it: whether your industry falls within the schedule of covered industries, and how many Malaysian employees you have.
The structure is a tier. Employers in a covered industry with ten or more Malaysian employees are required to register, and pay the levy at the standard rate. Employers with five to nine Malaysian employees may register on an optional basis, at a reduced rate. Below five employees the obligation generally does not arise.
Two details matter in practice. The count is of Malaysian employees, so a workforce that is largely non-citizen may sit below the threshold on a headcount that looks larger. And the threshold is tested as your headcount changes, so crossing from nine to ten employees creates a registration obligation, not a choice.
Confirm your industry, the current thresholds and the registration timeline directly with HRD Corp. The covered-industry schedule and the bands have both been revised, and getting this wrong means either paying a levy you do not owe or accruing arrears you do.
How the levy rate works
The levy is a percentage of each Malaysian employee's monthly wages, applied per employee and totalled for the month. Two rates exist, matching the two registration tiers: the standard rate for mandatory registrants, commonly stated as 1%, and a reduced rate for the optional band, commonly stated as 0.5%.
The levy is entirely the employer's cost. Nothing is deducted from the employee, and it should never appear as a deduction on a payslip.
The wage base is its own definition again. It generally covers basic salary and fixed allowances, and generally excludes items such as overtime, employer statutory contributions, and benefits in kind. As with EPF and SOCSO, do not reuse another scheme's wage figure without checking it.
Payment is monthly, due by the fifteenth of the following month, through HRD Corp's online system. Late payment attracts an interest charge.
How claims and the training fund work
The levy you pay accumulates in a levy account attached to your employer registration. It is not consumed by HRD Corp, it sits there as your balance to spend on training your own employees.
The general shape of a claim is:
- Choose a training programme and a provider that qualify under one of HRD Corp's schemes.
- Apply for a grant BEFORE the training takes place. This is the step SMEs most often get wrong. Training already completed without an approved grant is generally not claimable.
- Run the training and keep the attendance and payment evidence the scheme requires.
- Submit the claim after completion, and the approved amount is disbursed against your levy balance.
Different schemes cover different things, from external public courses to in-house training, and some cover related costs such as trainer fees, meals and travel within set limits. The claimable ceiling depends on the scheme, not on what you spent.
Unused levy is not necessarily yours forever. HRD Corp operates rules on how long a balance remains available, and unused amounts can be subject to forfeiture after a period. Check the current position before assuming a large balance will keep accumulating indefinitely.
The way to think about it
SMEs that treat the levy as a tax pay it, never claim, and lose the balance. SMEs that treat it as a pre-funded training budget plan a year of training around it and get most of it back as capability in the business.
The difference is administrative, not financial. It comes down to applying for the grant before the course rather than after, and keeping the paperwork.
What this means for your payroll
- Track your Malaysian employee headcount month by month, because it decides whether you must register.
- Keep the levy wage base separate from your EPF and SOCSO wage bases.
- Never deduct the levy from an employee. It is an employer cost only.
- Post the levy to a distinct expense account so the balance you have funded is visible to whoever plans training.
- Diarise the grant application ahead of any training, because approval after the fact usually cannot be recovered.
Important
This guide is general information, not legal or tax advice. Statutory rates, wage schedules and thresholds are revised from time to time. The official schedules and guidance published by KWSP, PERKESO, LHDN and HRD Corp always prevail over anything written here. Confirm the current figures with the relevant agency, or with your tax agent, before you run payroll on them.
Payroll that does this for you
Orbit HR calculates the HRD Corp levy alongside EPF, SOCSO, EIS and PCB, from its own wage base, so the monthly figure is ready when the payment falls due.
RM 249.00 once, unlimited employees, no per-head fee. Orbit HR runs on your own Mac or Windows machine and works offline, so employee data never leaves your office.