The Human Resources Development Fund (HRDF), managed by HRD Corp, is a compulsory levy aimed at supporting employee training and skill development. Employers contribute to the HRDF fund based on the monthly wages of their employees.

Understanding the HRD Corp Levies

Under HRD Corp (Human Resource Development Corporation, Malaysia), employers contribute a levy to support employee training and development. This levy amount, which is accumulated over time, must be utilized within two years (24 months). HRDF wants to encourage employers to consistently send their staff for training to improve their skills, hence they have revised it to 2 years from the original 5 years previously. If the funds remain unutilized after this period, they are subject to forfeiture, leaving a minimum balance of just RM10,000 in the employer’s account. The forfeited amount is calculated by subtracting any claims made during the two years from the levy balance two years prior. Employers contribute to the HRDF fund based on their employees’ monthly wages.

For companies with 10 or more Malaysian employees, a mandatory contribution of 1% of each employee’s monthly salary (including basic pay and fixed allowances) is required. Meanwhile, companies with 5 to 9 employees can choose to contribute voluntarily at a reduced rate of 0.5%.

Understanding the HRD Levy Forfeiture Formula

The HRD levy forfeiture formula calculates the remaining balance after a two-year period, helping employers track and avoid unnecessary forfeiture.

Let’s break it down in simpler terms,

Formula: Starting Balance (2 years ago) – Claims Made + Contributions (last 2 years) – Forfeiture Amount = Available Balance

Key Components:

Starting Balance: The levy amount in the employer’s account at the beginning of the two-year period.

Claims Made: The total funds claimed for employee training during the two years.

Forfeiture Amount: If no claims are made, an amount is forfeited, leaving a minimum balance of RM10,000.

Contributions: The total levy payments made by the employer over the two-year period.

Understanding HRD Levy Forfeiture: Simplified Examples

Example 1: Forfeiture Occurs An employer has a levy balance of RM100,000 as of January 2021. Over the next two years (2021–2023), no claims are made, but RM20,000 is contributed.

• Initial Levy Balance (Jan 2021): RM100,000
• Claims Made (2021–2023): RM0
• Contributions (2021–2023): RM20,000
• Forfeiture Amount: RM90,000 (to retain a minimum balance of RM10,000)
• Final Balance (Feb 2023): RM30,000 (RM100,000 – RM90,000 + RM20,000)

Example 2: No Forfeiture In this scenario, the employer starts with RM100,000 as of January 2021. During the same period, they claim RM5,000 and contribute RM20,000.

• Initial Levy Balance (Jan 2021): RM100,000
• Claims Made (2021–2023): RM5,000
• Contributions (2021–2023): RM20,000
• Forfeiture Amount: RM0 (claims were made)
• Final Balance (Feb 2023): RM115,000 (RM100,000 – RM5,000 + RM20,000)

Example 3: Small Levy Balances (Below RM10,000) Employers with a balance below RM10,000 are exempt from forfeiture. For example, if the balance is RM9,900 in January 2021 and RM5,000 is contributed over the next two years:

• Initial Levy Balance (Jan 2021): RM9,900
• Claims Made (2021–2023): RM0
• Contributions (2021–2023): RM5,000
• Forfeiture Amount: RM0 (balance is below RM10,000)
• Final Balance (Feb 2023): RM14,900 (RM9,900 + RM5,000)

These examples highlight the importance of making timely HRDF claims and maintaining awareness of levy balances to maximize the value of your contributions.

Why the HRD Corp Levy Matters?

The HRD Corp levy enables businesses to invest in workforce development, ensuring employees stay competitive and adaptable in a rapidly changing economy. It provides a dedicated fund for upskilling and reskilling through subsidized training programs, bridging skill gaps while boosting innovation and productivity. By utilizing the levy, companies build a high-performing team, align with national workforce goals, and drive organizational growth. More than a financial obligation, it’s a strategic investment in the future of work.

How can you avoid forfeiture?

To avoid forfeiture, employers should actively manage their levy by regularly auditing their balance, identifying training needs, and utilizing HRD Corp-approved programs. Encouraging employee participation in training and staying informed about HRD Corp guidelines ensures effective use of the levy while avoiding unnecessary financial losses. Investing in workforce development not only maximizes the value of the contributions but also enhances overall organizational growth.

For more information : https://supportcentre.hrdcorp.gov.my/portal/en/kb/levy/general