What Happens If You Don’t Utilize Your HRDF Fund in Malaysia (2024): Understanding the HRD Levy Balance Forfeiture Formula

The Human Resources Development Corporation (HRD Corp) plays a crucial role in enhancing workforce skills in Malaysia by managing employer contributions to the Human Resources Development Fund (HRDF). But what happens if these funds go unused? This guide will help you understand the HRD levy balance forfeiture formula and how to avoid losing your contributions.

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1. What is HRDF Malaysia?

The Human Resources Development Fund (HRDF), managed by HRD Corp, is a mandatory fund designed to support employee training and development. Contributions are made monthly by employers based on their employees' wages.

• Mandatory: Companies with 10 or more Malaysian employees must contribute 1% of each employee’s monthly wage.

• Voluntary: Companies with 5 to 9 employees may opt to contribute at 0.5%.

These contributions are meant to empower businesses to upskill their workforce and remain competitive in a dynamic market.

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2. Why is HRD Levy Forfeiture Important?

Despite the availability of HRDF funds, many employers underutilize them. To ensure active engagement in employee development, HRD Corp enforces a levy forfeiture policy. If no claims are made within a specific timeframe, part of the levy balance may be forfeited.

To avoid losing these valuable funds, businesses must understand the HRDF claim process, track deadlines, and submit claims in a timely manner.

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3. The HRD Levy Forfeiture Formula

Forfeiture occurs after a two-year period of inactivity. The formula to determine your available HRDF balance is:

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Levy Balance (2 years ago) – Claims made (within 2 years) – Forfeiture Amount + Contributions (within 2 years) = Available Balance

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Components explained:

• Levy Balance (2 years ago): The amount available in your account at the start of the 2-year period.

• Claims Made: Total HRDF claims submitted within those two years.

• Forfeiture Amount: Any unused amount forfeited after 2 years. A minimum retention of RM10,000 applies.

• Levy Contributions: Total contributions made during the 2-year period. 

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4. Examples of HRD Levy Forfeiture

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Example 1: Levy Forfeited

• Levy Balance (Jan 2021): RM100,000

• Claims Made (2021–2023): RM0

• Levy Contributed: RM20,000

• Forfeiture: RM90,000 (to retain RM10,000 minimum)

• Result: RM30,000 balance as of Feb 2023

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Example 2: No Forfeiture

• Levy Balance (Jan 2021): RM100,000

• Claims Made: RM5,000

• Levy Contributed: RM20,000

• Forfeiture: RM0

• Result: RM115,000 balance (RM100,000 – RM5,000 + RM20,000)

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Example 3: Levy Below RM10,000

• Levy Balance: RM9,900

• Claims Made: RM0

• Levy Contributed: RM5,000

• Forfeiture: RM0 (exempt due to low balance)

• Result: RM14,900 balance

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5. How to Avoid HRD Levy Forfeiture

Employers can retain the full value of their HRDF funds by:

• ✅ Regularly auditing HRDF contributions and claims

• ✅ Submitting claims on time

• ✅ Investing in employee training

• ✅ Monitoring claim activity and deadlines

• ✅ Maintaining proper records

Proactive management ensures that your company reaps the full benefits of the levy.

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6. Exemptions to Forfeiture

Levy balances below RM10,000 are exempt from forfeiture, regardless of claim activity. This policy supports smaller businesses that may have limited contributions or fewer training requirements.

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7. Conclusion

Understanding the HRDF forfeiture policy is essential for Malaysian employers. By making timely claims and regularly utilizing the fund, businesses not only avoid forfeiture but also enhance their workforce’s skills and productivity.

Key takeaway: Use it or lose it—your HRDF contributions are meant to be used for growth.

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8. Additional Resources

For more information or assistance:

• Visit the HRD Corp Official Website

• Contact HRD Corp Support for guidance on submitting claims and managing your levy