The HRD Corp Levy (HRDF) — Who Pays, How It Is Calculated, and How to Get It Back

Who has to register

Liability turns on one number: how many Malaysian employees you have. Under the PSMB Act 2001 (Act 612), an employee is a Malaysian citizen employed for wages under a contract of service, excluding domestic servants. Foreign workers are not counted in the headcount and no levy is payable on their wages — a point that changes the answer entirely for businesses with a largely non-citizen workforce.

A company director paid only director's fees is not an employee. A director paid a salary is, and counts in both the headcount and the levy base. Part-time and short-contract staff are the usual grey area and are worth confirming with HRD Corp rather than assuming.

The trap in voluntary registration

The 5-to-9 band is genuinely optional, and small employers often register on the logic that 0.5% is cheap access to funded training. That is usually right — but registration is not a subscription you cancel at will. Once you are registered you are a registered employer under the Act, with a monthly filing and payment obligation that continues until HRD Corp accepts a deregistration, and crossing into the 10-employee band moves you to 1% automatically.

Register when you have a real training plan and someone who will actually file the grant applications. Registering and then never claiming means you have volunteered for an extra payroll cost and taken nothing back.

Which wages the levy is charged on

The levy base is narrower than gross pay. It is basic salary plus fixed allowances paid in cash — the predictable, contractual part of the payslip — together with leave pay and wage arrears. Variable and one-off pay is excluded.

• Included: basic salary, fixed monthly allowances paid in cash, paid leave, arrears of wages.
• Excluded: bonus, commission, gratuity, overtime, shift, night-work and attendance allowances, travelling and transport allowances, employer contributions to any pension or retrenchment fund, apprenticeship payments.
• Unpaid leave reduces the base — the calculation runs on wages actually payable, not on the contractual figure.

A worked example

Take an employee on RM3,000 basic with a RM500 fixed allowance, who took no unpaid leave. The levy base is RM3,500, so at 1% the levy is RM35 for that month. Add a RM4,000 performance bonus in December and the levy base does not move — the bonus is excluded, so the levy is still RM35.

Scale that up and the number stops looking trivial. Twelve staff with a combined levy base of RM40,000 a month cost RM400 in levy monthly, or RM4,800 a year. That RM4,800 is not a tax: it sits in your levy account waiting to be claimed against training, and the employers who lose money on the scheme are the ones who never file a claim.

One rule that is not negotiable: the levy is the employer's cost. It cannot be deducted from an employee's wages, and doing so would also breach the deduction rules in the Employment Act 1955.

Paying it: the 15th, and the cost of being late

Levy for a month is due no later than the 15th day of the following month, under Regulation 8(1) of the PSMB (Registration of Employers and Payment of Levy) Regulations 2001. Payment and the monthly levy return are both handled through the e-TRiS portal, and the same deadline applies whether you have one liable employee or a thousand.

Late payment carries interest of 10% per annum, computed for each day of default — small in absolute terms on one late month, but it compounds quietly across years of arrears, and arrears block grant applications. On conviction, failing to pay the levy carries a fine of up to RM20,000 or imprisonment of up to two years, or both. Failing to register at all carries a fine of up to RM10,000 or up to one year's imprisonment, or both.

Practically, put the levy on the same payroll calendar entry as EPF, SOCSO and PCB. All four fall in the first half of the following month, and the levy is the one people forget because no employee ever chases it.

Getting the money back

The levy funds training for your own staff, claimed through HRD Corp's schemes in e-TRiS. The two you will meet most often are SBL and SBL-Khas. Under SBL the employer pays the training provider and then claims reimbursement from the levy account. Under SBL-Khas — the more popular route — HRD Corp pays the approved training provider directly, so the employer's cash never leaves.

The single most expensive mistake is timing. The grant must be applied for and approved before the training starts; a grant filed after the course has run is not claimable, however genuine the training was. Build in a couple of weeks for review and queries rather than filing on the eve of the programme, and keep the attendance records and provider invoices, because the claim is settled against them after the course.

There is also a use-it-or-lose-it dimension. HRD Corp has operated a policy under which levy left unutilised for an extended period can be forfeited, with employers expected to make at least one claim within the window to stay eligible. Treat an untouched levy balance as a deadline, not a savings account, and confirm the current utilisation rule with HRD Corp before you rely on a balance being there.

What employers get wrong

• Counting foreign workers in the headcount — only Malaysian employees count, for both liability and the levy base.
• Charging the levy on gross pay. Bonus, commission and overtime are outside the base; paying 1% on them is an overpayment you will not easily recover.
• Assuming a headcount drop below 10 ends the obligation. Registration continues until HRD Corp processes a change; tell them, do not just stop paying.
• Forgetting new hires. A liable employee enters the levy base from the month they are on the payroll, not at the next annual review.
• Filing the grant after the course. No prior approval, no claim — this is the most common reason levy money goes unused.
• Letting the balance sit for years. Unclaimed levy is a real, budgeted cost that bought nothing.

Important caveats

This guide covers the general HRD Corp levy framework for employers and is information, not professional advice. Sector coverage under the First Schedule, the treatment of part-time and fixed-term staff, deregistration, exemptions and the current levy-utilisation policy all depend on facts and on rules HRD Corp updates periodically — the scheme has changed materially more than once since 2020.

Confirm your own position at hrdcorp.gov.my or with HRD Corp directly before registering, deregistering or changing what you pay. The calculator below covers the SOCSO and EIS side of the same monthly payroll run, so you can see the full employer statutory cost of a salary in one place.