What is the Human Resources Development Fund (HRDF)?

As an employer, you’re always looking for ways to develop your team and keep up with industry demands but training costs are adding up.

Instead of delaying employee development, what if there was a way to offset these costs legally?

That’s where HRDF (Human Resources Development Fund) contributions come in.

Understanding HRDF contributions can help your company train employees effectively while managing costs.

This article will walk you through everything you need to know about HRDF, from contribution rates to payment processes.

What is HRDF?

The Human Resources Development Fund (HRDF) is a national initiative under HRD Corp (Human Resource Development Corporation), which operates under the Ministry of Human Resources Malaysia. Its main goal is to support businesses by funding employee training programs.

HRDF is not just another tax or expense. It’s a government-backed investment in workforce development.

Through this fund, employers can get financial assistance to upskill their employees, making businesses more efficient, innovative, and ready for market changes.

For businesses, HRDF helps:

Improve employee skills and productivity
Offset training costs through financial incentives
Meet government training requirements under the Employment Act of 1955
Build a stronger, more competitive workforce

Companies that invest in training through HRDF often see higher employee satisfaction, lower turnover rates, and better overall performance.

What is the HRDF Levy?

The HRDF levy is a mandatory payment that certain employers must pay based on their employee wages.

The amount is based on a percentage of employees’ monthly wages.

This fund is then used to support training programs that benefit the company and its workers.

The levy helps pay for training programs, making skill development more affordable for businesses.

This way, employers can train their employees without spending too much money.

Employers can benefit from the levy. It helps to reduce training costs, support ongoing learning, and help employees stay updated with industry changes.

With a well-trained workforce, businesses can improve productivity, adapt to new market demands, and stay competitive.

Investing in employee development also boosts job satisfaction, leading to better retention and a stronger, more capable team.

Who is Required to Contribute?

Not all companies in Malaysia are required to contribute to HRDF.

According to the Pembangunan Sumber Manusia Berhad (PSMB) Act 2001, employers must contribute if they:

Belong to specific industries covered under HRDF
Have at least 5 Malaysian employees

There are two contribution rates based on company size:

Number of Malaysian Employees	HRDF Contribution Rate
10 or more employees	1% of monthly wages
5 to 9 employees	0.5% of monthly wages (optional)

If a company has fewer than five Malaysian employees, they do not need to register.

What is the HRDF Contribution Rate in Malaysia?

The HRDF contribution is calculated based on an employee’s basic salary and fixed allowances. It does not include overtime, commissions, bonuses, or travel allowances.

Let’s say an employer contributes at 1%, and the employee earns:

Basic salary = RM3,000
Fixed allowance = RM300
HRDF Levy Calculation = (RM3,000 + RM300) × 1% = RM32.50

Employers must continue contributing at 1% for the entire calendar year, even if the number of employees falls below 10 at any point.

How to Register and Pay HRDF

To register, businesses need to sign up and make monthly payments based on their employees' wages. Here’s a simple guide to help employers follow HRDF rules.

1. Registration Process

Employers must register online through the HRD Corp website. The process requires documents like:

Company registration details
Latest employee payroll records
Employer integrity pledge form

Once registered, employers receive an HRDF account to manage their contributions.

2. Making Payments

After registration, employers must pay their HRDF levy every month by the 15th of the following month. Payments can be made via:

HRD Corp’s eTris system
FPX online banking
JomPAY

If an employer fails to pay on time, there are serious consequences:

Daily interest charges of 10% yearly interest are imposed for each day of delay.
Fines up to RM20,000. Under Section 13(1) of the PSMB Act 2001, failure to pay the levy can result in a fine not exceeding RM20,000.
Employers may face imprisonment of up to two years or both a fine and jail time if convicted.

To avoid penalties, make HRDF payments on time and keep records of each transaction.

How to Calculate HRDF Levy in Malaysia for Employers

The HRDF levy calculation formula is:

HRDF Levy = (Basic Salary + Fixed Allowance) × Contribution Rate

Example:

Let’s assume an employee earns RM2,500 with a fixed allowance of RM500. If the employer contributes at 1%, the calculation would be:

(RM2,500 + RM500) × 1% = RM30.00

How to make HRDF Levy Payment?

HRDF levy payments must be made every month, and the deadline is the 15th of the following month. For example, if an employee’s salary is for January 2025, the HRDF levy must be paid by 15 February 2025.

Below are the step-by-step to pay the HRDF levy payment.

Log in to the HRD Corp eTris system.
Enter payroll details for each employee.
Generate the levy amount based on salary data.
Make payment using eTris System, online banking (FPX, JomPAY, bank transfer), or auto deduction.
Save the receipt for future reference.

HRDF Exemption

Not all businesses are required to contribute to HRDF. Employers may be exempt if they meet specific criteria.

Companies that can apply for HRDF exemption include:

Government organizations (federal and state government agencies, statutory bodies, and local authorities.)
NGOs & charitable organizations (non-profits engaged in social welfare activities.)
Small businesses (companies with fewer than 5 local employees are not required to register with HRDF)
Certain industries (some sectors may qualify for temporary exemption based on government policies)

Process to Apply for HRDF Exemption

If an employer believes they qualify for HRDF exemption, they must formally apply through the HRDF system. Here’s the process:

1. Prepare Required Documents

Employers need to submit these documents to apply HRDF below:

Company registration details (SSM certificate).
Employee payroll records to prove workforce size.
Justification letter explaining why the exemption is requested.
Any additional documents required by HRDF.

2. Submit Exemption Request

Applications must be submitted via the eTris system. Attach all required documents above for verification.

3. Approval Process

HRDF will review the application and may request additional information. Then, employers will receive written notification once the exemption is approved or rejected.

4. Annual Review (If Applicable)

Some exemptions are temporary and must be renewed annually. So, employers must reapply if their business still qualifies for exemption.

How to claim HRDF?

Employers can claim HRDF contributions to cover employee training expenses, such as:

Course fees
Trainer fees
Accommodation & transport
Meal allowances

How to claim it?

Submit a training application via the eTris system before training begins.
Receive approval from HRD Corp.
Complete the training and submit proof (invoices, attendance records).
Get reimbursement for training costs.

HRDF supports various training methods, including:

In-house training (company-based)
Public training (external providers)
Coaching & mentoring
E-learning & online courses

FAQ

What happens if I don't pay HRDF?

Failure to pay HRDF can result in fines up to RM20,000 or two years of imprisonment.

Who should register with the Human Resource Development Fund?

Employers with five or more Malaysian employees in eligible industries must register.

Is the Human Resources Development (HRD) levy deducted from an employees’ employee’s wages?

No, HRDF is paid by employers and not deducted from employees’ wages.

Is the company director considered an employee?

If the director receives a salary, they are considered an employee. If they only receive director’s fees, they are not.

Is it compulsory for an employer to register?

Yes, under Section 13(1) of the PSMB Act 2001, all eligible employers must register with HRDF. Companies with 10 or more Malaysian employees are required to register, while those with 5 to 9 employees have the option to register voluntarily.

If my company does not want to register, what is the consequence?

Failure to register when required can lead to serious penalties:

Fines up to RM10,000
Imprisonment for up to 1 year
Legal action under the PSMB Act

Employers should register on time to avoid financial and legal risks.

If my company just registers with HRDF but does not pay the levy, what is the consequence?

Failure to pay can result in:

A fine up to RM20,000
A 10% interest charge for each day of delay

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