Malaysia HRDF Levy & Training Grant Guide 2026: Employer Registration, Levy Rates, How to Claim, and Recent Changes

The Human Resources Development Fund (HRDF), administered by Pembangunan Sumber Manusia Berhad (PSMB), is the least understood statutory obligation for Malaysian employers. Unlike EPF, SOCSO, and EIS — which appear visibly on employee payslips and attract immediate questions if missed — HRDF is a levy that employers pay on their total payroll, and many SME owners discover it only when they receive a registration notice and a bill for backdated levy.

The trade-off is that HRDF is not a sunk cost. Registered employers can claim training grants worth a multiple of the levy they pay. A company paying RM12,000 in annual HRDF levy can claim grants for employee training courses that exceed the levy in value, effectively subsidising — or fully covering — the cost of upskilling their workforce.

This guide covers who must register, the levy rates for 2026, what training qualifies for grants, how to submit a claim, and what happens if you do nothing.

While HRDF does not appear on individual pay calculations, it is part of the employer's total payroll cost. Use the DuitTools salary calculator to see the full employer cost per employee — including the employer's EPF, SOCSO, and EIS contributions, which together with HRDF make up the total statutory payroll burden.

What Is HRDF and Who Administers It?

HRDF was established under the Pembangunan Sumber Manusia Berhad Act 2001 (Act 612) . Its purpose is to incentivise employer investment in employee training by pooling a levy paid by employers and redistributing it as training grants.

PSMB, a government-linked company under the Ministry of Human Resources, manages the fund. It collects the levy, approves training programmes, and disburses grants to employers who train their Malaysian employees.

The core concept: levy in, grant out. Employers who train their workers can draw grants that significantly exceed the levy they pay. Employers who pay the levy but never claim training grants are effectively funding other employers' workforce development.

Who Must Register and Pay the HRDF Levy?

Compulsory registration

Employers must register with HRDF if they:

• Employ 10 or more Malaysian workers (the employee count includes all Malaysian employees, full-time and part-time)
• Are in a sector covered by the PSMB Act

The Act has been progressively expanded from manufacturing to cover most sectors of the Malaysian economy.

Sectors currently covered

HRDF registration is compulsory for employers in these sectors with 10+ Malaysian employees:

• Manufacturing — all manufacturing and production activities
• Services — including Information and Communication Technology (ICT), telecommunications, professional services, wholesale and retail trade, accommodation and food service, financial and insurance services, real estate, and business services
• Mining and quarrying
• Construction
• Agriculture, forestry, and fishing (with 20+ employees for some sub-sectors)

Since the 2021 expansion under the amendments to Act 612, most private-sector employers with 10 or more Malaysian employees are covered. The expansion subsumed sectoral distinctions to a large extent.

Voluntary registration

Employers with fewer than 10 Malaysian employees, or in sectors not compulsorily covered, can register voluntarily to access the training grant system. Many small employers do this because the grant access justifies the levy cost.

Who is exempt

• Government ministries, departments, and statutory bodies
• Local authorities
• Employers with fewer than 10 Malaysian employees in non-covered sectors

HRDF Levy Rates for 2026

The levy is calculated as a percentage of the total monthly wages of all Malaysian employees.

The levy is calculated on the gross monthly wages of Malaysian employees — base salary plus fixed allowances. It excludes contributions for foreign workers, but foreign worker wages count toward the employee headcount threshold.

Example: Employer with 15 Malaysian employees, total monthly payroll of RM60,000

Monthly HRDF levy = RM60,000 x 1.0% = RM600
Annual HRDF levy = RM600 x 12 = RM7,200

For an SME with a RM60,000 monthly payroll, the annual levy is RM7,200 — a manageable sum, but one that accumulates every month until registered.

Payment deadline

The levy is due by the 15th of the following month, the same deadline as EPF and SOCSO. Payment is made through the HRDF e-TRis portal — employers receive a levy assessment notice each month and can pay via FPX online banking, JomPAY, or bank transfer.

What HRDF Grants Cover: Training That Qualifies

HRDF-registered employers can claim grants for training programmes that develop the skills of their Malaysian employees. The grant categories cover a broad range of training types.

Allowable training expenditure

• Course fees paid to HRDF-registered training providers
• In-house training programme costs (trainer fees, materials, venue — subject to prior approval)
• Conference and seminar registration fees
• Professional certification examination fees
• On-the-job training (OJT) programme costs (subject to approval)
• e-learning and online course subscriptions (if delivered by registered providers)
• Internship training programme costs

What HRDF does NOT cover

• Training for non-Malaysian employees (foreign workers, expatriates)
• Overseas travel and accommodation costs for training outside Malaysia (separate fund categories may partially cover this, but the standard grant does not)
• Salaries paid to employees while they are attending training
• Training that is not job-related or does not develop skills relevant to the employee's role
• Training by unregistered providers (unless the employer receives prior approval from PSMB)

Grant rates

The standard grant rate is 70% of the allowable training cost for most programmes. PSMB also offers enhanced rates for specific priority areas:

How to Claim an HRDF Training Grant

Step 1: Select a training programme

Choose a training programme from an HRDF-registered training provider. The provider's HRDF registration number must appear on the training invoice and the grant application. You can search for registered training providers and approved programmes through the HRDF e-TRis portal.

Step 2: Submit a grant application (before the training)

For most programmes, you must submit the grant application (Form GR-1) through the e-TRis portal at least 7 days before the training programme starts. Late applications are rejected by default — this is the most common reason for denied claims.

The application requires:

• Training provider details and HRDF registration number
• Course title, date, duration, and venue
• Number of employees attending and their NRIC numbers
• Course fee per participant and total cost
• Training needs justification

Step 3: Attend the training

The employees attend the training programme. The training provider records attendance, and some programmes require an assessment or examination result for the grant to be disbursed.

Step 4: Submit the claim (after the training)

Within 30 days of programme completion, submit the claim (Form GR-2) through e-TRis. Attach:

• Certificate of attendance or completion
• Training provider invoice
• Proof of payment to the training provider
• Attendance records

Step 5: Receive the grant disbursement

PSMB reviews the claim and, if approved, disburses the grant to the employer's nominated bank account. The standard processing time is 14-30 working days from claim submission.

Financial Flow: A Worked Example

An employer with 15 Malaysian employees and RM60,000 monthly payroll:

The employer pays RM7,200 in levy and receives RM7,000 back in training grants. The net cost of RM200 represents the levy subsidy paid by employers who do not claim training grants. Employers who train consistently can achieve a net positive position — receiving more in grants than they pay in levy — when they utilise the enhanced SME and strategic programme grant rates.

Penalties for Non-Compliance

Failure to register

If an employer meets the registration threshold but fails to register, PSMB can:

• Impose the levy retrospectively from the date the employer first met the threshold
• Charge interest on the unpaid levy (typically the prevailing late payment rate)
• Impose a penalty of up to RM20,000 or imprisonment of up to 2 years for convictions under the Act

The retrospective levy is the most common consequence. An employer who should have registered in 2021 and is identified in 2026 will receive a bill for 5 years of unpaid levy plus interest — frequently exceeding RM50,000 before penalties.

Late payment of levy

Levy paid after the 15th of the following month attracts late payment interest. Repeated late payment can result in audit and penalty assessment.

Failure to submit returns

Employers must submit monthly levy returns through e-TRis reporting the total wages of Malaysian employees for the levy calculation. Failure to submit returns — even if no levy is due — is a compliance breach.

Recent HRDF Changes Employers Should Know

Levy scope expansion

The PSMB (Amendment) Act has progressively expanded the scope of compulsory registration. Most recently, sectors that were previously exempt — including retail, wholesale, and food and beverage — have been brought into the compulsory registration framework. Employers in these sectors who assumed they were exempt should verify their current status.

e-TRis portal

All HRDF transactions — registration, levy returns, grant applications, and claims — are processed through the e-TRis online portal. The portal has been upgraded significantly and now integrates with other government databases to cross-reference employee headcount data. Employers cannot claim ignorance of their registration obligation — the system identifies non-registered employers through EPF and PERKESO data cross-referencing.

Enhanced SME support

The government has increased grant rates for SMEs in priority sectors including digital economy, green technology, and advanced manufacturing. SMEs in these sectors should review the current strategic programme list before booking training — grants of up to 100% may apply.

FAQ

Do I pay HRDF levy on foreign worker wages?

No. The levy is only on the wages of Malaysian employees. However, foreign workers are counted toward the 10-employee registration threshold. If you have 8 Malaysian employees and 4 foreign workers, your total workforce is 12 — meeting the 10-employee threshold — but the levy is only calculated on the wages of the 8 Malaysian employees.

Can I claim HRDF grants for training I conduct in-house?

Yes, but with conditions. The in-house training programme must be pre-approved by PSMB. The trainer must meet PSMB's qualification criteria (relevant certification and industry experience). The training materials, schedule, and assessment method must be submitted with the application. The approval process takes longer than for training by external registered providers — plan at least 4-6 weeks ahead.

What happens to unused levy? Can I carry it forward?

The levy is not an account balance — it is a tax-like contribution to the HRDF pool. You cannot "accumulate" levy credits for future training. The grant amount you can claim is not limited to the levy you paid; you can claim more in grants than your levy contribution, subject to programme caps and approval. This is why employers who train actively benefit disproportionately.

Is HRDF the same as the Skills Development Fund (SDF)?

No. SDF was the precursor to HRDF, and the terminology sometimes persists colloquially. HRDF (under PSMB) replaced SDF when the PSMB Act was enacted in 2001. The legal entity is now PSMB, and the fund is HRDF. References to SDF in older employment contracts or company policies should be read as referring to HRDF.

Can I pay HRDF levy annually instead of monthly?

No. The levy is due monthly, based on that month's wages. Annual payment is not an option under the Act. Monthly compliance through e-TRis is a standing obligation.

How do I deregister if my employee count falls below 10?

You can apply to PSMB for voluntary deregistration if your Malaysian employee count falls below 10 and stays below 10 for a sustained period (typically a full calendar year). PSMB reviews the application and may conduct a verification visit before approving deregistration. Levy obligations continue until the deregistration is formally approved — you cannot simply stop paying because your headcount dropped.