As a Malaysian employer, you know about the HRDF contribution you make each month. But have you asked yourself: Are you paying more than you should?
Many businesses do, as it turns out. From wrong employee classifications to overlooked exemptions, mistakes in HRDF (now called HRD Corp) contributions happen more often than you might think — and they can drain thousands from your business every year.
Let’s look at the mistakes employers make and how to make sure you pay what you need to, while getting the most out of what’s HRDF claimable for training your team.
What Is HRDF Contribution?
The Human Resources Development Fund (HRDF) now HRD Corp, has a pool that employers pay into to train and upskill employees. This fund lets registered employers claim for approved training programs under HRDF claimable plans.
- Who must contribute?
All employers in specific sectors (manufacturing, services, mining & quarrying) with 10 or more local employees must register. Those with 5 to 9 employees can choose to sign up if they want.
- How much is the contribution?
The HRDF contribution rate stands at 1% of the monthly wages of each Malaysian employee.
But paying it is just one piece of the puzzle. Paying it right — and knowing when you don’t have to pay — is where many companies make mistakes.
Common Errors That Result in Paying Too Much HRDF Contribution
1. Adding Ineligible Staff to Calculations
A frequent mistake is figuring HRDF contributions for staff who shouldn’t be part of the equation, like:
- Employees from other countries
- Staff on contract through third-party agencies
- Interns or trainees not on your payroll
Only Malaysian staff employed by a company should be part of your HRDF contribution calculation. Including too many people = paying more than you need to.
2. Not Taking Advantage of the HRDF Exemption 2021 (and Other Exemptions)
When the pandemic was at its peak, the government brought in the HRDF exemption 2021 to give businesses a break. However, many companies:
- Had no idea they didn’t have to pay so they kept on paying
- Didn’t claim refunds even if they’d paid too much during this time
Even today, some employers might not need to pay HRD Corp contributions if their business changed categories or industries. It’s smart to check the newest HRD Corp notices and exceptions. You can also look at the MyCoID system or HRD Corp‘s main website to see if your company is registered.
3. Failing to Update Employee Numbers Quickly
HRD Corp eligibility depends on how many local employees you have. Companies that fall under the 10-employee limit might keep paying without knowing they can stop (unless they signed up by choice).
If your team has gotten smaller, it’s worth finding out if you still have to make mandatory contributions.
4. Late De-registration After Business Closure or Change in Industry
Some companies that stop operating or switch to non-eligible sectors forget to de-register their registration with HRD Corp. This leads to ongoing payments that are not needed.
To prevent this, make sure you tell HRD Corp about any changes in your business type, if you stop operating, or if you merge with another company. Also, send in the required paperwork to update your status.
5. Not Making Full Use of HRDF Claimable Benefits
Here’s the catch — some companies don’t pay too much, but they might as well, because they never ask for what they have a right to.
HRD Corp contributions aim to help your employees grow. You can ask for money back for:
- Certified training courses
- In-house training
- External workshops/seminars
Programs like SBL-Khas, Penjana HRDF, and others allow you to get your training expenses back — if you understand the process.
Penjana HRDF, for example, started during the COVID-19 crisis to give unemployed Malaysians new skills. Though new applications are no longer accepted many employers didn’t use it because they didn’t know about it.
How to Steer Clear of These Expensive Errors
- Check Your Contribution Setup Often
Put a reminder in your calendar to look at your HRD Corp contribution setup every three months:
- Are you including the right employees?
- Has the number of employees changed?
- Does your industry still fall under mandatory HRD Corp categories?
- Check Your Payroll Software or HRMS
An HRMS like Info-Tech’s HR & Accounting Software helps cut down on manual mistakes in payroll, including correct statutory calculations such as HRD Corp contributions. It also maintains a clean record to audit and document claims.
Want to make your HRDF processes run smoother? Begin by reviewing how your system handles payroll calculations. A tiny setup mistake can grow into thousands in overpaid levies.
- Keep Up with HRD Corp Guidelines
HRD Corp often changes its policies. Sign up for their newsletter or keep an eye on their official website to learn about:
- New training programs you can claim
- Policy exceptions like the 2021 HRDF exception
- Changes in sector classifications
Should You Check Your HRDF Contributions?
Yes, you should. An internal check can show:
- Too much money paid in the last 1-2 years
- Missed chances to get money back during the 2021 HRDF exception
- Training paybacks you didn’t claim
You can even send a letter to HRD Corp to ask for a refund or to adjust your credit if you find mistakes.
To Sum Up
HRD Corp contributions aren’t just another tax — they have a strategic impact on your workforce. But to gain from them, you need to pay right, claim right, and stay informed.
So, set aside half an hour this week. Meet with your HR or payroll team. Ask the tough question:
“Are we paying too much in HRD Corp contributions?”
It could save your company more than you think.
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