The HRD Corp Levy in Malaysia 2026: The 1% Every Employer Pays and Most Foreign-Owned Companies Never Claim Back — Why Your Expatriates Count in Neither the Headcount Nor the Levy Base, the 15th-of-the-Month Deadline, the Arrears Rule That Strands Your Own Money, and What the January 2026 Allowable Cost Matrix Actually Pays For

Almost every foreign-owned company in Malaysia pays the HRD Corp levy. Very few use it. The levy shows up on the payroll report as a 1% line that nobody questions, gets paid by the 15th of every month, and accumulates in an account the company has never logged into — while the same company sends its managers on training courses it pays for separately, in cash, out of budget. This is not a tax. It is a restricted training fund held in your name, and the money in it can only ever come back to you as training. This guide sets out who is caught by the Pembangunan Sumber Manusia Berhad Act 2001, why your expatriates count in neither the headcount nor the levy base, what happens to your claims the moment you fall into arrears, and — using HRD Corp's January 2026 Allowable Cost Matrix — exactly what the fund will and will not pay for.

A levy, not a tax: what the PSMB Act 2001 actually does

The Pembangunan Sumber Manusia Berhad Act 2001 (Act 612) exists, in its own words, "for the imposition and collection of a human resources development levy for the purpose of promoting the training and development of employees, apprentices and trainees." The collecting body is the Human Resource Development Corporation (HRD Corp), under the Ministry of Human Resources.

The distinction from tax matters commercially. Corporate tax leaves the business and does not come back. The HRD levy leaves the business, sits in a levy account attributed to your employer registration, and is drawn down when your employees are trained. An employer that never claims has simply chosen to pay 1% of its Malaysian payroll for nothing.

Coverage used to be narrow. Since the expansion of the Act in 2021 it is not: the First Schedule now reaches more than forty industries — manufacturing, construction, agriculture, tourism, telecommunications, education, healthcare, social welfare, professional services and most of the rest of the economy. In practice the assumption should be inverted: assume you are covered and check the First Schedule to see whether you are the exception, rather than the other way round.

Who must register: the ten-Malaysian-employee test

The threshold is the single most misread provision in the whole regime, because it is counted in a way most HR systems do not.

The optional band deserves a moment's thought rather than a reflex "no". At 0.5%, a company with nine Malaysian staff on an average RM5,000 a month contributes roughly RM225 a month — about RM2,700 a year — and gains access to a claimable-course ecosystem in which a single in-house programme can carry a course fee of several thousand ringgit. For a growing company that intends to cross ten employees anyway, registering early builds a balance before the balance is needed.

Why your expatriates count in neither direction

Here is the provision that surprises foreign-owned companies most, and it cuts both ways.

HRD Corp defines an employee as "any citizen of Malaysia who is employed for wages under a contract of service with an employer." Non-citizens are outside that definition entirely. The consequences are symmetrical:

• Expatriates do not count toward the 10-employee threshold. A company with three Malaysian administrators and forty engineers on Employment Passes is not a mandatory contributor. A company with eleven Malaysian staff and no expatriates is.
• Expatriate wages are not in the levy base. The 1% is calculated on the wages of Malaysian employees only. A payroll system that applies the levy across the whole wage bill is over-contributing every month.
• Expatriates are, correspondingly, not the intended beneficiaries. The fund exists to develop the Malaysian workforce. Training claims are built around the employees whose wages generated the levy.

What counts as "wages" for the 1%

HRD Corp's levy base is basic salary plus fixed allowances. The word doing the work is fixed: a monthly housing or transport allowance paid at a constant amount is in; a variable, performance-linked or reimbursement-based payment is not.

Marginal items — a retention allowance, a fixed "meal subsidy", an allowance that is nominally variable but paid identically every month — should be tested against HRD Corp's current guidance rather than assumed, because the classification decides whether it is in the base for the life of the employment.

Registering, and the notice nobody files

Registration is by Form 1 (Registration of Employer), submitted online through eTRiS, HRD Corp's employer portal. Supporting documents follow the ordinary corporate pattern — constitutional documents and company information, plus the latest EPF statement, which is how HRD Corp verifies the Malaysian headcount. Processing typically takes about three days where the file is complete, after which the employer receives portal credentials and an onboarding session.

The provision that is routinely missed sits at the other end. Under section 13(3), where a person ceases to be an employer under the Act, they must notify HRD Corp within thirty days of that cessation. A company that winds down its Malaysian operations, drops below the threshold or is struck off does not simply stop having obligations — it has to say so. Otherwise the registration remains live, and the arrears accrue against a dormant entity.

Paying: the 15th, and the interest that freezes your claims

The levy is payable by the 15th of each month for the preceding month's wages, through eTRiS. Late payment attracts interest at 10% per annum on the amount in default.

The interest itself is rarely the problem. The problem is what arrears do to your access to the fund, and this is the mechanism most employers do not see coming:

These are criminal, not civil, provisions — a point worth making to a finance team that has mentally filed the levy alongside a utility bill. In the same register as the Employment Act 1955 obligations, this is an offence-bearing statute, not a billing arrangement.

Getting it back: three schemes, three different cash flows

HRD Corp runs a family of schemes. Three of them cover the great majority of ordinary corporate training, and the difference between them is essentially who pays the provider first.

HRD Corp Claimable Courses (HCC) is the main scheme and the one most employers should default to. Its defining feature is that the employer makes no advance payment: the course fee is paid to the registered training provider by HRD Corp after the claim is approved, debited from the accumulated levy. It covers in-house training, public training, remote online training in both forms, development programmes, e-learning, coaching and mentoring, and mobile e-learning. Grant applications must be submitted at least one day before training starts.

Skim Bantuan Latihan (SBL) is the exception route. It exists so that employers can use trainers from non-registered providers and their own internal trainers — but the cash flow reverses: the employer pays the provider and then claims reimbursement. Use it when the trainer you need is genuinely outside the registered ecosystem; do not use it as the default, because it puts the working capital on you.

Skim Latihan Bersama (SLB) is the shared in-house scheme, for a single course attended by employees of two or more HRD Corp-registered employers, with the cost split by attendance. For a group with several Malaysian entities, or a company that trains alongside its suppliers, SLB turns one RM10,500 programme into a per-head cost that can be a fraction of the public-course rate.

Beyond these sit the specialised schemes — training facilities and renovation (ALAT), IT and computer-aided training, computer-based training, the Industrial Training Scheme, Future Workers Training, Recognition of Prior Learning, on-the-job training and Skim Latihan Dual Nasional — which matter to manufacturers building their own training capacity rather than buying courses.

What the January 2026 Allowable Cost Matrix actually pays

The ceilings are not negotiated with the provider; they are set by HRD Corp's Allowable Cost Matrix (ACM), and a quotation above the ceiling simply means the excess is yours. These are the figures in the January 2026 ACM.

The Focus Area category is the one worth reading twice, because it is uncapped "as charged" and it maps directly onto the capability gaps foreign manufacturers and technology companies actually have: Industry 4.0, green technology and renewable energy, fintech, smart construction, smart farming, aerospace, blockchain, micro-credentials and future technology. A company that routes its technical upskilling through these fields is claiming against a far more generous line than one booking generic soft-skills courses.

The rules that void a claim

Claims fail for a short and predictable list of reasons, almost all of them procedural rather than substantive:

• The grant application was not filed before the training started. Under HCC it must be in at least one day prior. Retrospective approval is not the design of the scheme.
• The provider is not registered and the employer used HCC rather than SBL. The scheme, not the trainer, was the wrong choice.
• Arrears or late-payment interest are outstanding, which blocks HCC applications entirely.
• Attendance does not match the claim. Per-pax categories are prorated on completed attendance — if three of five registered participants completed, the claim is for three.
• The content is not work-related. Personal development unconnected to the employee's duties is outside the fund's purpose.
• The claim was submitted late. HRD Corp sets the submission window by circular; the working assumption should be to claim within months of completion, not to let a year's training pile up for a single December filing.

Turning the levy into an annual training plan

The practical objective is simple: spend the levy on purpose, before it becomes a balance nobody manages. A workable annual rhythm for a foreign-owned company with, say, forty Malaysian employees:

1. Compute the annual levy. Forty Malaysian employees at an average RM6,000 basic plus fixed allowances gives a monthly base of RM240,000, a levy of RM2,400 a month — RM28,800 a year. That is the budget you are already spending.
2. Convert it into programme slots. At the in-house ceiling of RM10,500 a day, that is roughly two and a half full days of customised in-house training a year for the whole company — or, at the public-course rate of RM1,750 per person per day, about sixteen individual course-days. Most companies find the in-house route better value once more than six people need the same content.
3. Front-load the plan. Decide the year's programmes in the first quarter, and file grant applications ahead of each — not the day before.
4. Route technical training through Focus Areas. Where the content genuinely fits Industry 4.0, green technology, fintech or the other listed fields, the "as charged" basis removes the daily ceiling from the equation.
5. Reconcile the levy account quarterly. Balance, claims approved, claims pending, arrears. A quarterly look is what stops a balance from silently becoming unusable.

Where foreign-owned companies go wrong

They never log in. The most common posture is a company that has paid the levy correctly for five years and has never once opened eTRiS. There is no refund mechanism and no carry-out — the only exit for that money is training.

They pay for training twice. A technical course is booked and paid from the departmental budget, in cash, while a levy balance sits untouched. Under HCC the employer should not be paying the provider at all.

They count the wrong heads. Either registering on an expatriate-inclusive headcount, or levying 1% of a wage bill that includes expatriate remuneration. Both are corrigible, and both are worth catching before an audit does.

They let arrears sit. A few months of late payment is a small interest charge and a total loss of access to the fund. The second consequence is the expensive one.

They treat it as HR's problem. The levy is computed by payroll, paid by finance, spent by HR and enforced criminally against the company. It needs one owner with sight of all three — the same discipline that makes the rest of the employer obligations work, from statutory contributions through to the exit filings when an expatriate leaves.

ONE BUSINESS SOLUTION advises foreign-owned companies in Malaysia on the full employer compliance stack — payroll and statutory contributions, HRD Corp registration and levy computation, employment documentation and the immigration lifecycle. If you are not sure whether you are liable, whether you have been over-contributing, or what is sitting in your levy account, talk to us or review our payroll and bookkeeping services.

This article is general information only, not legal, tax or immigration advice. Policies, thresholds and official fees are set by the relevant Malaysian authorities and may change. Talk to our consultants about your specific situation.