HRDF mulls over imposing levy on all employers

The move to collect the levy could come as early as mid-2019


The Human Resources Development Fund (HRDF) is expected to impose the training levy on all employers, except for the banking, finance and construction sectors, by the middle of next year.

HRDF CEO Datuk CM Vignaesvaran Jeyandran (picture) said the move to collect the levy from the expanded sectors could come as early as mid-2019, involving over nine million employers.

“We have received primary approval from the government, but the formal agreement from the HR minister will be secured by year-end.

“Discussions will then be held with the industries and the HRDF board, followed by a public announcement, maybe early next year,” he told The Malaysian Reserve in an interview.

He said the move to expand the levy coverage will enable HRDF, the government’s employees training arm, to double its annual collection to RM1.4 billion in the next five years. HRDF currently collects about RM700 million in levy from the 63 subsectors.

Vignaesvaran said the construction, banking and finance sectors are excluded as these industries are already levied by the related regulatory bodies.

“The core banking segment is being regulated by Bank Negara Malaysia (BNM), while the Construction Industry Development Board (CIDB) is already imposing levy on the construction sector. So, we don’t want to double-tax these industries,” he said.

However, Vignaesvaran said talks are underway between HRDF and BNM to impose a Human Resource Development (HRD) levy on sub-sectors in the banking and finance sectors, which are currently not subjected to any fees from the central bank.

Governed by Pembangunan Sumber Manusia Bhd Act 2001 via Section 14(1), eligible employers are subject to compulsory registration and must pay a 1% HRD levy for each employee based on the monthly wages of the employee.

Employers, who opt to be registered, are required to pay 0.5% of the monthly wages of the employee. Subsectors currently compelled to pay the HRD levy are under the services, manufacturing, and mining and quarrying sectors.

Vignaesvaran said HRDF usually disburses an exact amount of collection back to the industries for training and re-skilling purposes.

“Last year, we collected RM700 million and we disbursed the same amount,” he said.

HRDF is also in the middle of improving its database, to track and trace advancements of employees who have utilised HRDF for training and re-skilling purposes.

Vignaesvaran said HRDF will be able to track training programmes attended by employees and the progress made by the individuals at their work place.

“Now, the companies are allowed to choose the training programmes and the vendor that they want. They then write in to us for rationale and cost structure.

“We will then examine the request and later seek for progress report for employees who have attended the training programme,” he said.

Vignaesvaran also said HRDF has tasked enforcement officers to check on site whether the training programmes are being held with the approved participants.

HRDF currently controls a fund of RM2 billion, mostly kept in fixed deposits.

About over RM200 million of the fund has been invested in the equity market through a fund manager.

Vignaesvaran said although the fund’s size is expected to grow in coming years, HRDF will continue to be cautious in its investment strategy.

“We don’t want to be ambitious. We want to keep most of our fund in almost cash form, which is in fixed deposits.

“If the equity market can give us better return than fixed deposits, we are happy,” he said.