Understanding HRDF calculation is essential for employers in Malaysia who are required to contribute to workforce development funding under the Human Resources Development framework administered by HRD Corp (Human Resource Development Corporation).
The HRDF levy is a mandatory monthly contribution based on employee wages. While the concept appears straightforward, correct HRDF calculation depends on accurate wage classification, employee definition, and proper exclusion of non-eligible allowances.
Content Outline
Key Summary
HRDF Levy Is Managed by HRD Corp
The HRDF (Human Resource Development Fund) levy is administered by HRD Corp and is mandatory for eligible employers in Malaysia.
Standard Contribution Rates Apply Based on Eligibility
The usual HRDF levy rate is 1% of monthly wages, while certain eligible employers may qualify for a reduced rate of 0.5%.
Only Fixed Components of Salary Are Included
HRDF calculations are based on fixed wages such as basic salary and fixed allowances, excluding variable components.
Variable Payments Are Not Subject to HRDF
Bonuses, overtime pay, commissions, and other irregular earnings are excluded from the levy calculation.
HRDF Formula Is Based on Eligible Wage Components
The levy is calculated using: [(Basic Salary – Unpaid Leave) + Fixed Allowance] × 1%
Monthly Payment Must Be Submitted via e-TRiS
Employers are required to submit and pay the HRDF levy through the e-TRiS system by the 15th of the following month.
Non-Compliance Leads to Penalties
Late or incorrect payments may result in fines, penalties, or legal enforcement actions by the authorities.
What is HRDF Levy?
It is a statutory contribution collected from eligible employers to fund employee training and skills development programs in Malaysia.
It is designed to:
- Improve workforce capability
- Support HRD Corp-approved training programs
- Encourage continuous upskilling of employees
The levy is calculated monthly based on eligible wages using the official HRDFcalculation framework.
Legal Framework Behind HRDF Calculation (PSMB Act 2001)
It is governed under the Pembangunan Sumber Manusia Berhad (PSMB) Act 2001, which defines levy rates and employer obligations.
Who is Considered an Employee for HRDF Calculation?
Accurate employee classification is critical for correct HRDF calculation.
Included as Employees:
- Malaysian citizens under a contract of service
- Full-time employees (permanent or contract)
- Employees receiving wages from the employer
Special Rule (Important):
- Company directors/owners/partners receiving salary are considered employees
- Directors receiving only director fees are NOT considered employees
Excluded:
- Domestic servants
- Non-contractual or freelance service providers
Incorrect classification is one of the most common causes of HRDF calculation errors during audits.
What Counts as Wages in HRDF Calculation?
Only specific wage components are included in HRDF calculation.
Included in HRDF Calculation:
- Basic salary
- Fixed monthly allowances
- Leave pay
- Wage arrears
These components are considered stable and predictable income elements.
Excluded from HRDF Calculation:
- Pension contributions or retirement benefits
- Retrenchment or termination payments
- Travel allowances and concessions
- Apprentice allowances
Allowances NOT Included in HRDF Calculation
To ensure correct payroll compliance, the following are excluded:
Incentive-Based Payments:
- Bonuses
- Commissions
- Gratuity payments
- Production incentives
Variable Monthly Allowances:
- Overtime pay
- Shift allowance
- Night shift allowance
- Attendance allowance (variable amount)
Reimbursements:
- Petrol or travel reimbursements
- Special expense claims
- Welfare-related contributions
These are excluded because they are not fixed components of wages.
HRDF Calculation Formula
The standard formula is:
HRDF Levy = [(Basic Salary – Unpaid Leave) + Fixed Allowance] × 1%
Key Rules:
- Only fixed wage components are included
- Variable allowances are excluded
- Final amount must be rounded to 2 decimal places
- Calculation is performed monthly per employee
Example of HRDF Calculation
Employee Details:
- Basic salary: RM3,500
- Fixed allowance: RM500
- Unpaid leave deduction: RM200
Step-by-step calculation:
[(3500 – 200) + 500] × 1%
= (3300 + 500) × 1%
= 3800 × 1%
= RM38.00
This represents the monthly HRDF contribution for one employee.
How to Pay HRDF Levy via e-TRiS
Employers must submit and pay HRDF levy through the official e-TRiS portal.
Step 1: Login
- Access the HRD Corp e-TRiS system
- Login using MyCoID credentials
Step 2: Navigate Levy Section
- Click Application
- Select Levy
- Choose Form 2 E-Slip
Step 3: Select Payment Type
Choose:
- Levy (current month)
- Arrears (outstanding payments)
- Interest (if applicable)
Step 4: Enter Payment Details
- Payment month
- Number of employees
- Total wages
- System-calculated levy
Step 5: Declaration
Enter:
- Officer-in-charge name
- IC number
- Designation
Step 6: Choose Payment Method
Online Payment
- Public Bank Berhad (PBB)
- RHB Bank Berhad
- MEPS FPX
JomPAY
- Biller Code: 500181
- Pay via online banking or ATM
Manual Payment
- Print e-slip
- Submit payment at bank counter
HRDF Payment Deadline Rules
- Payment must be made on or before the 15th of the following month
- If the 15th is a public holiday → pay on the previous working day
- Late payments are classified as arrears
Timely HRDF calculation and submission is essential for compliance.
Penalties for Late or Incorrect HRDF Calculation
Non-compliance may result in:
- 10% late payment penalty
- Up to RM20,000 fine
- Imprisonment up to 2 years, or both
These penalties highlight the importance of accurate HRDF calculation and timely reporting.
Common Mistakes
Employers frequently make errors such as:
- Including bonuses or overtime in HRDF calculation
- Misclassifying directors as employees
- Incorrectly treating allowances as fixed wages
- Missing submission deadlines
- Payroll reporting inconsistencies
Streamline HR Compliance with FastLane Recruit
Managing HRDF calculation, payroll compliance, and statutory reporting can be complex—especially for growing businesses. Errors in wage classification or missed deadlines can lead to unnecessary penalties and administrative burden.
FastLane Recruit EOR services supports businesses in building efficient and compliant HR operations by helping companies hire the right talent and structure their workforce more effectively.
Our support includes:
- Strategic recruitment solutions for SMEs and growing companies
- Workforce planning aligned with operational and compliance needs
- HR structure advisory to support scalable business growth
- End-to-end recruitment support to strengthen your HR function
Get in touch with FastLane Recruit Services!
FAQ: HRDF Calculation in Malaysia
How is HRDF calculation done?
HRDF calculation is based on 1% of eligible monthly wages including basic salary and fixed allowances.
Are bonuses included in HRDF calculation?
No, bonuses and commissions are excluded.
Is overtime included in HRDF calculation?
No, overtime is considered a variable allowance and excluded.
What is the HRDF levy rate?
The standard rate is 1%, with a reduced rate of 0.5% for eligible employers.
What happens if HRDF is paid late?
A 10% penalty is imposed, and legal action may apply in severe cases.
