HRD Corp Levy Malaysia 2026: Who Pays and How to Calculate the 1% / 0.5% Levy

The HRD Corp levy is 1% of each Malaysian employee's monthly basic salary plus fixed allowances if your company has 10 or more Malaysian employees, or 0.5% if you have 5 to 9 and have registered under the optional category. It is paid by the employer only (it can never be deducted from gaji), and it is due by the 15th of every month.

This guide explains who must register under the Pembangunan Sumber Manusia Berhad Act 2001 (PSMB Act, Act 612), how to calculate the levy with worked RM examples, what it adds to your total cost per employee, the 2026 exemption for the education industry, and what happens if you pay late.

Who must register with HRD Corp

Since the Act was expanded on 1 March 2021 (P.U.(A) 84/2021), almost every private-sector industry is covered, from manufacturing, retail and construction to F&B, professional services, IT, healthcare and education. Whether you must register depends on how many Malaysian employees you have:

A few points that decide the headcount:

• Only Malaysian citizens count. The Act defines an employee as a citizen of Malaysia employed for wages under a contract of service, excluding domestic servants. Foreign workers aren't counted.
• Salaried directors count; fee-only directors don't. A director who draws a salary is an employee. A director paid only director's fees is not.
• NGOs are in the optional category. An NGO with five or more employees running a labour union, religious or political organisation, a care home or orphanage, or social work without lodging may register at 0.5%.
• Government isn't covered. Federal and state government, local councils and statutory bodies are outside the Act.

If you are covered, section 13(1) requires you to register. HRD Corp's registration regulations allow 30 days to submit Form 1. You submit it online through the HRD Corp portal, with your Form 9 / Section 17 or business licence, a company profile and your latest EPF statement. If HRD Corp writes to ask you to submit Form 1, reply even if you think you aren't liable. Only HRD Corp can decide whether you are, and ignoring the letter for 30 days can lead to a compound of up to RM2,000.

How to calculate the HRD levy

HRD Corp's own formula is:

Levy = (total basic salaries + fixed allowances of Malaysian employees) × 1% (or × 0.5% for the optional category)

Work it out each month in four steps:

1. List every Malaysian employee on that month's payroll, including salaried directors.
2. For each one, add basic salary + fixed allowances (allowances paid at the same amount every month, such as a fixed transport or housing allowance).
3. Add up the total for all employees.
4. Multiply by 1% (mandatory) or 0.5% (optional).

Variable pay such as overtime, commission and an annual bonus isn't part of HRD Corp's "basic salary + fixed allowances" formula. If an allowance changes from month to month, or you aren't sure whether it's "fixed", ask HRD Corp before you exclude it rather than guessing.

Example 1: a 12-person company (1%)

Syarikat Maju has 12 Malaysian employees, so it's in the mandatory category:

• 10 staff at basic RM3,000 + fixed transport allowance RM200 = RM3,200 each → RM32,000
• 2 managers at basic RM6,000 + fixed car allowance RM500 = RM6,500 each → RM13,000
• Total levy wages = RM45,000
• HRD levy = RM45,000 × 1% = RM450 a month, or RM5,400 a year

If the staff also earned RM1,500 in overtime that month, the levy under HRD Corp's formula would stay at RM450, because overtime isn't basic salary or a fixed allowance.

Example 2: a 7-person café (0.5%)

Kafe Senja has 7 Malaysian staff, each on basic RM2,500 + a fixed meal allowance of RM100. It chose to register under the optional category:

• Total levy wages = 7 × RM2,600 = RM18,200
• HRD levy = RM18,200 × 0.5% = RM91 a month, or RM1,092 a year

If the café grows to 10 Malaysian employees, it moves to the mandatory category and the rate doubles to 1%.

Total employer cost per employee (EPF + SOCSO + EIS + HRD)

The HRD levy is the smallest of the four statutory costs an employer pays on top of gaji, but it's easy to forget when you budget for a new hire. For a Malaysian employee below 60, on basic pay only, at a company paying the 1% levy:

Example 3: what one hire really costs

Basic RM3,000:

• EPF employer 13% = RM390.00
• SOCSO employer = RM51.65
• EIS employer = RM5.90
• HRD levy 1% = RM30.00
• Total monthly cost = RM3,477.55

Basic RM5,000:

• EPF employer 13% = RM650.00
• SOCSO employer = RM86.65
• EIS employer = RM9.90
• HRD levy 1% = RM50.00
• Total monthly cost = RM5,796.55 (the levy is about 0.9% of it)

Basic RM8,000:

• EPF employer 12% (wages above RM5,000) = RM960.00
• SOCSO employer = RM104.15 (capped at the RM6,000 wage ceiling)
• EIS employer = RM11.90 (also capped)
• HRD levy 1% = RM80.00 (no ceiling)
• Total monthly cost = RM9,156.05

Note the last line: SOCSO and EIS stop rising at RM6,000, but the HRD levy has no wage ceiling, so it keeps growing at 1% of the full amount. The SOCSO and EIS figures come from PERKESO's official schedule (see our SOCSO and EIS contribution table). You can check the EPF, SOCSO and EIS side for any salary with the salary calculator.

2026 exemption for the education industry

HRD Corp Employer's Circular No. 01/2026 (15 January 2026) gives registered employers in the education industries, including preschools, private schools, skills training centres and private higher learning institutions, a 12-month levy exemption covering January to December 2026. The exemption was announced by the Prime Minister at National Training Week 2025.

If you run a tuition centre or a private school, check your eTRiS account to confirm that the exemption applies to your registration, and note that the circular covers only the January to December 2026 contribution months.

Paying the levy, and what happens if you're late

• Deadline: the levy must be paid by the 15th of every month. HRD Corp's FAQ sets this deadline, and it's the same date as EPF, SOCSO, EIS and PCB (see the monthly payroll checklist).
• Late payment interest: 10% a year for each day the levy is overdue. As an illustration, RM450 paid 30 days late costs about RM450 × 10% × 30 ÷ 365 = RM3.70 in interest.
• Not paying: on conviction, a fine of up to RM20,000, up to 2 years' jail, or both.
• Not registering when liable: a fine of up to RM10,000, up to 1 year's jail, or both (section 13(2)).
• Tax: the levy is an allowable expense under the Income Tax Act 1967, so it reduces your business's taxable profit.

What you get back: the levy builds up in your company's HRD Corp account, and you use it to fund approved training for your Malaysian staff through schemes such as HRD Corp Claimable Courses and SBL. You apply for a grant before the training, then claim the actual cost or the approved amount, whichever is lower.

Leaving HRD Corp (deregistration)

Registration doesn't end automatically when your headcount falls. Under section 16(2) you may apply to deregister only if your Malaysian headcount stays below the minimum for three consecutive months, or if your business changes to an activity the Act doesn't cover. If the company ceases operations, is wound up or is acquired, notify HRD Corp within 30 days. Any unused levy balance goes to HRD Corp's general reserve. It isn't refunded.

Common mistakes

• Deducting the levy from staff pay. Never allowed, under any circumstances. It's 100% an employer cost.
• Counting foreign workers. The headcount and the levy are based on Malaysian employees only.
• Leaving out fixed allowances. A fixed monthly transport, housing or car allowance is part of the levy wages, not only basic salary.
• Stopping payment when headcount drops to 9. You stay registered and liable until HRD Corp approves your deregistration.
• Assuming a small business is exempt. From 10 Malaysian employees, registration is mandatory in almost every industry since March 2021.
• Not using the levy. The balance is your training budget. Unused levy isn't refunded if you deregister.

Quick checklist for employers

1. Count your Malaysian employees, including salaried directors.
2. If you have 10 or more, submit Form 1 within 30 days. If you have 5 to 9, decide whether to opt in.
3. Each month, take basic salary + fixed allowances for Malaysian staff, multiply by 1% or 0.5%, and pay by the 15th.
4. Budget for the levy in your cost per hire, alongside EPF, SOCSO and EIS.
5. Plan training so the levy you pay is actually used.