In Plain English: HRDF for Businesses in Malaysia

Reading Time: 4 minutes

Thanks for dropping by our 4th edition of In Plain English, a blog series where we lay out in easy-to-read terms, the numbers and regulations involving statutory laws. This time, we discuss HRDF for your business in Malaysia.

What is HRDF?

The Human Resources Development Fund (HRDF) levy is a mandatory levy payment. Employers need to make this payment to HRD Corp, a government agency under Pembangunan Sumber Manusia Berhad (PSMB).

This aims to encourage employers covered under the PSMB Act 2001 to retrain and upgrade the skills of their local staff in line with their business needs and company development strategy.

Who is eligible for HRDF?

From 1 March 2021, the HRD Corp has expanded access to HRDF to all industries. Firms with 10 or more local employees must register, while firms with 5 to 9 local employees have the option to register.

The HRD Corp originally exempted employers under the newly-included industries for 3 months from 1 March to 31 May 2021. The exemption has extended to 31 December 2021; so no levy would be due for June to Dec 2021 payrolls.

How do I register for it?

Step 1: Keep a digital copy of the following required documents

  • Form ROC/ROB,
  • Latest EPF/SOCSO;
  • Form 8,
  • Company’s profile or annual report
  • Form 9,
  • Form B;

Step 2: Visit the HRD Corp website to download the checklist

Step 3: Once you have all the items in the checklist, submit your registration via Form 1. You can access the form here. The application will be reviewed by the officers within 30 days and a confirmation email will be sent to the company.

 

How do I calculate the levy?

HRD levy = HRD levy %* x Wage

The levy should be calculated up to 2 decimal points.

What is ‘Wage’?

In this equation, ‘Wage’ essentially consists of:

  • Basic Salary. This is the salary paid before making any deductions for EPF, SOCSO, Zakat, PCB, etc.
  • Fixed Allowances. These are allowances paid regularly and are unchanged on a monthly basis.

There are wages exempted from levy imposition, as listed below:

  • Any fund or scheme contribution to employee benefits or welfare (e.g. pension fund, provident fund, superannuation scheme, retrenchment, termination, lay-off or retirement scheme, thrift scheme);
  • Travel allowance or traveling concession value;
  • Any special expense for employment needs;
  • Gratuity on discharge or retirement;
  • Bonuses and commissions; and
  • Apprenticeship allowance under an apprenticeship contract.

What is ‘HRD levy %’?

*With reference to Levy Calculation Guidelines prepared by HRDF, the HRD levy % is:

  • 1% of each employee’s monthly wage for employers under the compulsory category.
  • 0.5% or 1% of each employee’s monthly wage for employers under the optional category who choose to register under the compulsory category.

Do note that the employee must be a Malaysian citizen employed under a service contract, excluding those employed as a domestic servant.

When there is a change in the number of employees throughout the year, the HRD levy % also changes for optional category employers.

SELECTED FOR YOU  Guide to Filing Taxes in Malaysia 2021: Defining the Perquisites in Form EA
MonthNo. of EmployeesLevy Rate
Jan 202190.5%
Feb 202190.5%
Mar 202190.5%
Apr 2021101% (Remained until Dec 2021)
May 202181%
Jun 2021101%
Jul 202191%
Aug 202181%
Sep 2021111%
Oct 202161%
Nov 202151%
Dec 202161%
Jan 202290.5%
Feb 2022121% (Remained until Dec 2022)

Do note that the levy rate for employers registered under the compulsory category is maintained at 1% although the number of employees is reduced to less than 10 employees.

Test your manual HRD levy calculation

With all the information that you’ve learned so far on how the HRD levy calculation works, let’s test your memory!

With reference to the details provided in the other columns, calculate:

  • Total Salary Subject to Levy; and
  • HRD/PSMB Levy (%)

for each employee and write down the values for your own reference.

WorkersMalaysianGross SalaryFixed AllowanceComm
ission
BonusUnpaid LeaveTotal Salary Subject to LevyHRD/PSMB Levy
AYes1,362.581003001,362.58
BYes1,664.001203501,664.00
CYes1,746.781403201,746.7880.00
DYes2,123.421604002,123.42
EYes4,152.144704,152.14
FNo3,500.002002003,500.00
TOTAL14,548.929002,04014,548.9280.00
NOTE: The above table is pretty wide. Depending on your device,
you may need to scroll to the right to see more of the table’s columns.

Once you’re done, check your answer against the figures in the table below:

WorkersMalaysianGross Salary
[A]
Fixed Allowance
[B]
Comm
ission
BonusUnpaid Leave
[C]
Total Salary Subject to Levy
[A+B-C]
HRD/PSMB Levy
AYes1,362.581003001,362.581,462.58 14.63
BYes1,664.001203501,664.001,784.0017.84
CYes1,746.781403201,746.7880.001,806.7818.07
DYes2,123.421604002,123.422,283.4222.83
EYes4,152.144704,152.144,152.1441.52
FNo3,500.002002003,500.00
TOTAL14,548.929002,04014,548.9280.0011,768.92114.89
Total levy to be paid: RM 114.89

No worries if you’ve not gotten the numbers right on your first try! Keep trying out this exercise until you get it right. However, if manual calculations isn’t for you…

Let a payroll software automate HRD Levy calculations for you

Talenox Malaysia is an HRMS that has helped thousands of businesses in Malaysia process payroll and HRD levies. Once a Talenox user has processed payroll for a specific month, the HRDF amount will be auto-calculated and reflected under Payroll Settings > Month Total (Month/Year) > Statutory Summary tab

Sign up for a free 30-day trial to try out all the features and integrations!

When is the levy payment due date?

As an employer, you will need to remit all HRD levy payments no later than the 15th day of the following month. For example, you will need to pay the levy for August 2021 latest by 15th September 2021.

How can I claim HRD?

You can submit an online claim application via eTRiS portal under Skim Bantuan Latihan (SBL).

Your application must include the required document as below:

Application Required Document:

  • Online application through eTRiS system
  • Invoice / Quotation
  • Training Schedule / Course Content
  • Trainer’s Profile

Claim Required Document:

  • Itinerary (airfare) – if any
  • Receipt & Invoice (transportation) – if any

Notable training programs must commence within six (6) months from the date of training grant applications are made. You will also need to submit your training claim submissions not more than six (6) months from the date the training programs are completed.

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