The Human Resources Development Fund (HRDF), managed by HRD Corporation (Human Resource Development Corporation), is a program designed to help Malaysian businesses train and develop their employees, ensuring in acquiring and retaining talents.
By contributing to HRDF, businesses stay compliant with regulations, improve employee performance, boost productivity, and foster a culture of continuous learning in the workplace.
Here’s a simple guide to understanding HRDF contributions, including who needs to contribute, the rates, and how to claim training benefits.
Key Takeaway
- What is HRDF Contribution: A mandatory payment made by employers to fund employee training and development in Malaysia.
- 3 Benefits of HRDF Contribution: Enhances workforce skills, reduces training costs, and improves employee retention.
- Who Needs to Contribute: Employers in the manufacturing, services, and mining sectors with 10 or more Malaysian employees (5-9 employees can contribute voluntarily).
- HRDF Contribution Rate: 1% of monthly salaries for mandatory contributors; 0.5% for voluntary contributors (5-9 employees).
- HRDF Calculation: Contribution = 1% x Monthly Salary (for mandatory) or 0.5% x Monthly Salary (for voluntary).
- Types of Training Eligible for Claims: In-house, external, online, certification, team-building, and on-the-job training programs.
- How to Make a Claim: Submit claims through the e-TRiS system before training starts or within 6 months after completion.
- Penalties for Not HRDF Compliance: Failure to register or contribute may result in fines and legal penalties under the PSMB Act 2001.
- Updates and Changes: Regularly check the HRD Corp website for policy changes and new initiatives.
What is HRDF Contribution?
HRDF contribution is a small fee employers pay to support employee training and development.
A small percentage of their employee’s salaries is contributed to this fund.
This helps ensure that Malaysia’s workforce stays skilled, productive, and competitive in the business landscape through approved training programs, which are financially supported by HRD Corp.
3 Benefits of HRDF Contributions
Skill Development and Continuous Learning
HRDF contributions provide employers with access to financial support for a wide range of training programs. This allows businesses to continuously upskill and reskill their employees, keeping their skills relevant and up-to-date.
- Enhanced Competitiveness: Well-trained employees can adapt to new technologies, processes, and market demands, helping the business stay competitive
- Innovation and Efficiency: Employees with current skills can introduce innovative ideas and improve work efficiency
- Future-Ready Workforce: Training in areas like digital transformation, leadership, and technical skills ensures your workforce is prepared for future challenges
Examples: Technical skills workshops, digital skills and industry 4.0 training, and leadership and soft skills development
Cost Savings on Employee Training
By contributing to HRDF, businesses can claim back the costs of eligible training programs, reducing the financial burden of employee development. HRDF funds can cover a significant portion or even the entire approved training costs.
- Lower Training Expenses: Companies can recover claimable costs, making it easier to invest in continuous employee development without impacting their budget
- Direct Payment Option: Programs like SBL-Khas allow HRDF to pay training providers directly, eliminating the need for upfront payments by employers
- Wide Range of Training Programmes: Malaysian employers can provide diverse training opportunities without worrying about high costs, including certifications, online courses, and team-building activities
For example, if a technical course costs RM5,000, HRDF can reimburse the full or partial amount based on the claim scheme, making training more affordable.
Improved Employee Retention and Engagement
Offering training and development opportunities through HRDF shows that a company is committed to its employees’ growth. This leads to higher job satisfaction, engagement, and loyalty.
- Higher Retention Rates: Employees are more likely to stay with a company that invests in their career development
- Increased Morale and Motivation: Training boosts employee confidence and motivation, leading to better performance
- Positive Workplace Culture: A focus on continuous learning fosters a culture of improvement and innovation
Examples: Leadership development programs, team-building activities, and skills certification courses
Who Needs to Contribute?
HRDF contributions are required for businesses that meet specific criteria set by the Pembangunan Sumber Manusia Berhad (PSMB) Act 2001.
| Type of Contributors | Description |
| Mandatory Contributors | Employers in big businesses such as manufacturing, services, and mining and quarrying sectors with 10 or more Malaysian employees must contribute to HRDF |
| Voluntary Contributors | Small businesses that have employers with 5 to 9 Malaysian employees can choose to register voluntarily |
| Sector Classification | Industries (from hospitality and retail to logistics and construction) that fall under HRDF requirement are specified under the PSMB Act 2001 |
Note: Individuals who are not under the registered companies cannot contribute and claim from the HRDF.
Additional criteria to be eligible to contribute to the fund include:
- Employees: Must be Malaysian citizens
- Registration: The business must be registered with SSM or relevant authorities
- HRD Corp Registration: Must register with HRD Corp within 30 days of eligibility
Foreign workers are not included in the HRDF coverage.
HRDF allows training to take place locally within Malaysia or internationally if it benefits the employee’s role and business needs.
How to Calculate HRDF Contribution
HRDF Contribution Rate
The contribution rates are designed to be affordable while ensuring a steady fund for employee training.
| Type of Contributor Rate | Description |
| Mandatory Contributor Rate | Employers with 10 or more employees must contribute 1% of each Malaysian employee’s monthly basic salary
Example: If an employee earns RM3,000 per month, the employer contributes RM30 monthly to HRDF |
| Voluntary Contributor Rate | Employers with 5 to 9 employees can opt to contribute at a reduced rate of 0.5% of each Malaysian employee’s monthly basic salary |
Calculate Total Monthly Basic Salary
Your total monthly basic salary includes:
- Basic salary
- Fixed allowances (e.g., housing allowance, cost of living allowance)
- Overtime pays
- Bonuses (if applicable)
Any reimbursements or allowances that are not fixed (e.g., travel reimbursements) are not included in your salary.
Apply the Contribution Rate
Use the determined contribution rate (1% or 0.5%) and apply it to the total monthly basic salary of all Malaysian employees:
Formula:
HRDF Contribution=Total Monthly Basic Salary × Contribution Rate (1% or 0.5%)
Example:
If the total monthly wages for eligible Malaysian employees is RM50,000:
- Contribution Rate: 1%
- HRDF Contribution = RM50,000 × 1% = RM500
Types of Training Eligible for Claims
HRDF offers various types of training grant to meet different business needs.
| Type of Training | Claim Code | Description | Examples |
| Skim Bantuan Latihan (SBL-Khas) | SBL-KHAS | HRDF pays training providers directly for approved external courses | Technical workshops, certification courses, soft skills development programs |
| PENJANA HRDF Initiatives | PENJANA | Reskilling and upskilling support under the PENJANA economic stimulus plan. | Supports business recovery and workforce growth. |
| In-House Training | INCT | Training is conducted within the company premises using internal or external trainers. | Leadership training, safety workshops, customised employee development programs. |
| External Training | EXT | Training sessions attended by employees at an offsite location provided by external trainers. | Public seminars, technical courses, industry-specific training. |
| Online/Remote Training | REMT | Virtual training programs are conducted via online platforms, allowing remote participation. | Webinars, e-learning modules, remote certification programs. |
| Public Training Programs | PUBT | Open training programs attended by employees from multiple organisations | Public soft skills seminars, technical certification classes, industry conferences. |
| Team Building Activities | TEAM | Programs are designed to improve teamwork, communication, and engagement. | Outdoor team-building challenges, problem-solving activities, CSR team-building programs. |
| On-the-Job Training | OJT | Hands-on training is part of regular job duties. | Apprenticeships, workplace safety drills, skill development for new hires. |
| Certification and Technical Programs | CERT | Training that leads to professional or technical certification. | ISO certification courses, industry-specific technical programs, licensing courses. |
| Soft Skills Training | SOFT | Programs focused on improving interpersonal and communication skills. | Leadership development, time management, effective communication workshops. |
| Computer-Based Training | CBT | Self-paced training conducted through digital tools or software. | IT training, data analysis tools, cybersecurity awareness programs. |
These funds for training make it easier for companies to invest in employee development without financial strain.
The above table comes in handy when you are applying for HRDF claims for upcoming corporate programs and activities.
Avoid common mistakes when applying HRDF claims for smooth online application processes.
How to Make a Claim
Claiming HRDF benefits is a straightforward process.
| Description | |
| eTRiS System | Employers must log in to the eTRiS dashboard to submit claims, including application and documentation |
| Claim Deadlines | Claims must be submitted before the training starts or within six (6) months after the training is completed |
Check out our step-by-step guide for applying for HRDF claims, with detailed documentation and requirements, to minimise rejections and lesser delays in the application process and assessment.
Penalties for Non-Compliance
Employers who fail to comply with HRDF contribution guideline may face:
- Non-compliance with the PSMB Act can lead to monetary fines or legal action.
- It is crucial for employers to register and contribute to HRDF to avoid these penalties.
Updates and Changes
HRDF policies and schemes may change.
Employers should regularly visit the HRD Corp website and review official updates to remain compliant and take advantage of new initiatives.
Conclusion
HRDF contributions are a valuable investment in your company’s growth. They help you develop a skilled workforce, improve employee retention, and reduce training costs.
From technical skills to team-building activities, HRDF offers many training opportunities to keep your team competitive and motivated.
Need help with HRDF claims? My Weekend Plan, an HRDF-certified team-building provider, offers guidance and support to simplify the claim process. Let us help you maximise your HRDF benefits and build a stronger, more productive team!