What is HRDF Fund Contribution?

One of the items that companies usually forget (or don't know) that they need to contribute is the HRDF Fund Contribution, which is 1% from the employee's salary. However, this is not a deduction. This is additional payment by the company to be paid to HRDF.

The following is more information on the HRDF Fund contribution levy:

Section 14(1) of PSMB Act, 2001 stipulates that there shall be paid by every employer to whom the PSMB Act, 2001 applies, a HRD levy in respect of each of his employees at the rate of one per centum (1%) of the monthly wages of the employee.

Section 15(2) of PSMB Act, 2001 stipulates that there shall be paid by employer a HRD levy in respect of each of his employees at the rate of 0.5 per centum of the monthly wages of the employee (applicable to employer who opts to be registered).

An employer who is liable to pay the HRD levy shall pay those levies for the first and subsequent months' wages commencing from the date the employer becomes liable as stated under the Regulation 7 of the Pembangunan Sumber Manusia Berhad (Registration of Employers and Payment of Levy) Regulations 2001. The payment of the HRD levy is the responsibility of employers. Employers are not permitted to deduct the wages of employees under any circumstances for the payment of the levy.

Which company need to register with HRDF? (Or also known as PSMB in Bahasa Melayu)

Section 13(1) of the PSMB Act 2001 stipulates that every employer who is covered under the Act is required to register with PSMB within such time and manner as may be prescribed.

Any employer who is convicted for not registering with PSMB may be fined up to an amount not exceeding RM10,000 or face imprisonment up to a year, or both (Section 13 (2)).

According to the First Schedule of PSMB Act, 2001, definitions of industries covered are as follows:

SUB-SECTOR / INDUSTRY	ELIGIBILITY CRITERIA	RATE OF LEVY PAYMENT
SERVICES SECTOR
Hotel Air transport Travel Agency (inbound) Telecommunication Freight Forwarding Shipping Postal or Courier Advertising Computer Services Energy Training Higher Education Commercial Land Transport & Railway Transport Services Direct Selling Port Services Engineering Support and Maintenance Services Research and Development Warehousing Services Security Services Private Hospital Services Gas, Steam and Air-Conditioning Supply Water Treatment and Supply Sewerage Waste Management and Material Recovery Services Production of Motion Picture, Video and Television Programme, Sound Recording and Music Publishing Information Service Building and Landscape Services Event Management Services Early Childhood Education Health Support Services Franchise Sale and Repair of Motor Vehicles Private Broadcasting Services Driving School Veterinary Services Hypermarket, Supermarket and  Departmental Store Services Food and Beverage Services Tourism Enterprise (outbound)	≥ 10 Malaysian Employees (mandatory to register) 5 - 9 Malaysian Employees (given option to register)	1% 0.5%
MANUFACTURING SECTOR
Making or processing of an article by labour or machine or both, including the transformation of parts or components into another article of a different nature or character by way of altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, including the building of a ship or the assembly of parts of a ship.	≥ 10 Malaysian Employees (mandatory to register) 5 - 9 Malaysian Employees (given option to register)	1% 0.5%
MINING & QUARRYING SECTOR
Petroleum and Gas Extraction Mineral and Stone Quarrying	≥ 10 Malaysian Employees (mandatory to register) 5 - 9 Malaysian Employees (given option to register)	0.5% 1%

In OfficeCentral payroll, HRDF levy contribution is automatically calculated when you select that you contribute to HRDF. This make it easy for you to calculate the monthly levy to remit payment to HRDF in timely manner.

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