HRD Corp Levy: Use It Before You Lose It – Understanding the 2-Year Levy Usage Rule

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Introduction

Employee training and development play a vital role in improving an organisation’s productivity and competitiveness. In Malaysia, the Human Resource Development Corporation (HRD Corp) provides financial assistance to eligible employers through the HRD Corp Levy. However, many employers are unaware that levy funds have a limited usage period. If the levy is not utilised within the specified timeframe, a portion of the funds may be forfeited. Therefore, understanding the HRD Corp Levy usage policy is essential for every employer.

What is the HRD Corp Levy?

The HRD Corp Levy is a mandatory contribution under the Pembangunan Sumber Manusia Berhad (PSMB) Act 2001. Eligible employers are required to contribute 1% of their employees’ monthly wages to HRD Corp.

The purpose of this levy is to encourage employers to invest in employee learning, skills development, and professional training. Through this initiative, employers can apply for financial assistance to cover training programmes that improve employees’ knowledge and competencies.

Understanding the 2-Year Levy Usage Rule

 HRD Corp introduced the 2-Year Levy Utilisation Rule to ensure that levy funds are actively used for employee training and development.

Employers are encouraged to utilise their levy within 24 months from the date of credit. This policy aims to prevent unused funds and help employers plan continuous training activities effectively.

If there is still a remaining levy balance after the 24-month period, forfeiture may be applied based on Employer Circular No. 7/2019.

The amount of forfeiture depends on the remaining levy balance:

• Balance exceeding RM10,000: Any amount above RM10,000 will be forfeited.
• Balance of RM10,000 or below: The full amount will be retained.

This rule encourages employers to maximise their levy funds through courses, skills training, and employee development programmes to enhance workforce capabilities and improve organisational productivity.

No Refund Mechanism

Another important point highlighted in the guideline is that there is no refund mechanism for forfeited levy funds.

Once the levy has been forfeited after exceeding the allowable period, employers cannot claim the money back. Therefore, employers should monitor their levy balance regularly and make proper training plans before the levy expires.

Why Should Employers Use Their Levy?

Making full use of the HRD Corp Levy provides many advantages, including:

• Improving employees’ knowledge and skills.
• Increasing employee productivity and work performance.
• Supporting organisational growth through continuous learning.
• Reducing training costs by using levy funds.
• Avoiding unnecessary forfeiture of levy contributions.

Tips for Employers

To maximise the benefits of the HRD Corp Levy, employers should:

• Monitor their levy balance regularly.
• Plan annual employee training programmes.
• Submit training claims promptly.
• Keep proper records of levy usage.
• Ensure the levy is utilised before reaching the 24-month expiry period.

These practices help organisations make full use of the financial assistance provided by HRD Corp while strengthening workforce capabilities.

Conclusion

The HRD Corp Levy is more than just a mandatory employer contribution. It is an investment in employee development and organisational success. Understanding the 2-Year Levy Usage Rule helps employers avoid forfeiture and maximise the value of their levy contributions.

By planning training activities strategically and using the available levy on time, employers can develop a skilled workforce while ensuring that valuable training funds are not wasted.

Source:  HRD Corp – Employers’ Circular No. 7/2019 (Revised Unutilised Levy Mechanism) dan HRD Corp Support Centre (Levy Forfeiture Guidelines). (HRD Corp Support Centre)