1. What the HRD levy is
The HRD levy is an employer contribution to Malaysia's national training fund, run by HRD Corp (formerly HRDF) under the Pembangunan Sumber Manusia Berhad Act 2001 (PSMB Act). It is not a tax and it is not a deduction from employees: the employer pays it on top of wages, and the money sits in the employer's own training account to be claimed back for approved employee training. It is a separate line from EPF, SOCSO, EIS and PCB — and unlike those, it only applies to employers who are covered and registered.
2. Who must register
Registration is compulsory for employers with 10 or more Malaysian employees in a sector covered by the PSMB Act, at 1% of monthly wages. Employers with 5 to 9 Malaysian employees may register voluntarily, at 0.5%. Employers with fewer than 5 Malaysian employees are not covered. Coverage also depends on sector: the PSMB Act's First Schedule lists the covered sectors, and HRD Corp — not the employer — decides eligibility. If you are unsure whether your sector is covered, check with HRD Corp before assuming either way. The payroll calculator includes the levy as an off-by-default option (none, 1%, 0.5%) so you can see its effect on employer cost.
3. How it is calculated
The levy is charged on basic salary plus fixed allowances only. It excludes variable pay such as overtime, bonuses and commissions. Worked examples: a monthly wage bill of RM100,000 (basic plus fixed allowances) at the compulsory 1% rate gives a levy of RM1,000 a month; a bill of RM50,000 at the voluntary 0.5% rate gives RM250 a month. Because it is charged on basic and fixed allowances rather than total gross pay, applying 1% to a whole payroll that includes bonuses overstates the levy.
4. Payment and deadlines
The levy is due by the 15th of the month following the salary month — the same monthly rhythm as PCB remittance. Late payment can attract interest, and failure to register or pay can lead to a fine of up to RM10,000, imprisonment of up to one year, or both. Keep the levy out of employees' payslips as a deduction: HRD Corp states it must not be deducted from employees' wages under any circumstances.
5. What the levy buys
Registered employers claim approved training costs back from their levy balance through HRD Corp's eTRiS portal, using registered training providers and approved programmes. Unused balances remain in the employer's account for future training rather than vanishing at month-end. The levy therefore behaves like a training budget you are required to fund, not money lost: the return depends on whether the employer actually trains its staff.
6. Common mistakes
- Deducting the levy from employees' wages. It is an employer cost, never an employee deduction.
- Charging it on total gross pay including bonuses and overtime. The base is basic salary plus fixed allowances only.
- Assuming every employer is covered. Coverage depends on sector and headcount — HRD Corp decides eligibility.
- Missing the 15th-of-the-month deadline, which creates arrears and interest.
- Paying the levy but never claiming training, leaving the balance unused.
7. Common questions
Is the HRD levy part of PCB? No. PCB is income tax; the levy is a training-fund contribution. They are separate lines with separate deadlines and recipients.
Does it reduce an employee's net pay? No. It is paid by the employer on top of wages and must not be deducted from pay.
We have 7 Malaysian employees. Must we register? No — registration is voluntary at 5 to 9 employees, at 0.5%. It becomes compulsory at 10.
Does the payroll calculator include the levy? Yes, as an off-by-default option: none, 1% or 0.5%. Switch it on only if your company is registered or liable.
Sources: Pembangunan Sumber Manusia Berhad Act 2001 (PSMB Act); HRD Corp employer guidance. This guide is an independent estimate aid, not an official HRD Corp publication and not advice. Rates and thresholds are as published for 2026; sector coverage and eligibility are decided by HRD Corp. Published 3 November 2026 · PCBCalc.my Editorial Team · Kuala Lumpur, Malaysia · Independent guide