What is HRDF in Malaysia?

Malaysia's economic growth and stability are closely tied to its Human Resources development. Central to this effort is the Human Resources Development Fund, or HRDF. For those unacquainted with HRDF, it's a pivotal initiative designed to enhance skill development and the Human Resource capabilities of organizations across Malaysia.

The HRDF isn't just a financial contribution—it's an investment in human capital. The fund is entrusted with the mission of equipping Malaysia's workforce with the skills and knowledge needed to meet the demands of a rapidly evolving job market. The HRDF supports the country's employment standards and ensures that businesses and employees remain competitive and adaptable.

Here, we’ll explore what exactly defines the HRDF, its purpose, the benefits you can expect from it, and everything else you need for a comprehensive appreciation of the HRDF initiative.

Understanding HRDF in Malaysia

Malaysia places great emphasis on Human Resource development. The HRDF is central to this commitment, and acts as a pillar of the nation's talent development initiatives.

Definition and Purpose of HRDF

The HRDF in Malaysia is a financial pool that's dedicated to supporting and empowering Human Resource development in the country. It's managed by the HRD Corp, which operates under the Malaysian Ministry of Human Resources. The primary purpose of the HRDF is to provide financial assistance to employers for their employees' training and skill development to help address employee performance gaps.

Regulatory framework and Governing Bodies (HRDF Levy & The Government Special Fund)

The HRDF operates within a well-structured regulatory framework. Employers in Malaysia contribute to HRDF through a monthly levy. This levy, calculated based on the number of their employees, represents a major chunk of funding for the HRDF. Additionally, there's the Government Special Fund, established to support more specific HRDF initiatives.

These funds are managed and disbursed to enhance the skills and capabilities of the Malaysian workforce, which contributes to the nation's socio-economic development. 

Benefits of HRDF

For Businesses

Supporting Business Growth and Development
The HRDF empowers businesses by enhancing the skills and knowledge of their workforce. This contributes to business growth and development, as a well-trained workforce is more adept at tackling challenges and achieving organizational goals.

Financial Incentives and Grants for Registered Employers
Businesses registered with the HRDF can access financial incentives and grants to offset training and development costs. These incentives alleviate the financial burden associated with upskilling employees.

Compliance with the Employment Act 1955
Complying with HRDF requirements ensures that businesses fulfill their obligations under the Employment Act 1955, which mandates that employers provide opportunities for employee training and development.

Learn more: Understanding Malaysia’s Employment Act

For HR Leaders:

Opportunities for Professional Development and Upskilling

HR professionals, particularly those responsible for talent development, benefit from the HRDF by gaining opportunities for their own professional development and upskilling in areas related to Human Resource management.

Enhancing HR Practices and Capabilities

Access to the HRDF helps HR leaders improve their department's practices and capabilities, aligning them with international standards. This, in turn, strengthens the organization's overall Human Resource management.

Promoting a Culture of Continuous Learning Within the Organization

HR leaders can leverage the HRDF to promote a culture of continuous learning within their organization. This encourages employees to continuously acquire new skills and knowledge, enhancing overall workforce productivity.

Read next: Shrinking Employee Performance Gaps Through Analysis and Continuous Learning

For Employees:

Career Development and Enhanced Employability

Employees who participate in HRDF-sponsored training programs experience personal career growth and enhanced employability. As they acquire new skills and knowledge, they become more valuable assets to their employers and the job market as a whole.

Improved Work Satisfaction

With opportunities for learning and growth, employees often experience improved work satisfaction. This is because they feel valued by their employers and empowered to take control of their own career paths.

Enhanced Job Security

Learning and upskilling through the HRDF programs can enhance job security, as employees become adaptable and equipped to meet the evolving demands of the job market.

HRDF Contributions and Eligibility

Who Is Eligible to Contribute to HRDF?

HRDF contributions are mandatory for employers operating within certain sectors. Private sector employers with one or more employees who are Malaysian citizens must contribute. 

However, certain organizations and industries (like government departments, local authorities, diplomatic missions, and households employing domestic help) are exempt from this requirement. 

Understanding the Contribution Rates and Calculation

Contributions to HRDF are calculated based on the employer's monthly payroll, excluding overtime, allowances, and other non-fixed payment. The applicable contribution rate for employers is periodically updated, so it’s important to keep an eye on the HRD Corp website. 

These rates are determined by HRDF and typically fall within a specified percentage range of the total monthly payroll.

How HRDF Contributions Are Utilized for Employee Development

The funds collected through HRDF are channeled into a variety of training programs and initiatives aimed at upskilling and reskilling the Malaysian workforce. These programs cover a wide spectrum of skills, including technical, vocational, and soft skills, depending on the needs of the industry and the demands of the job market.

As we discussed above, employers and employees alike benefit from these programs, which can lead to improved job performance, career advancement, and overall competitiveness in the workforce. By investing in their employees through the HRDF, companies not only enhance their own capabilities but also contribute to the nation's economic development.

Employer Grant Schemes Offered Through HRDF

The Employer Grant Schemes play a pivotal role in empowering employers to nurture their employees' skills, enabling them to stay competitive in an ever-evolving job market. Here’s the overview of what makes up these schemes:

Incumbent Worker Training:

• Designed to enhance the skills of existing employees.
• Focuses on upskilling and reskilling to adapt to industry changes.

Skills Upgrading Programs:

• Targeted at improving employees' proficiency in specific skill sets.
• Aids in creating a workforce that's aligned with industry demands.

Apprenticeship Program:

• Supports the hiring and training of new talent.
• Provides financial assistance to companies engaging in apprenticeship programs.

Recognition of Prior Experiential Learning (RPEL):

• Allows employees to receive formal recognition for their prior work experience.
• Can result in certifications or qualifications, further enhancing employability.

Technology-Enhanced Learning:

• Encourages companies to adopt technology-driven learning solutions.
• Enhances the digital capabilities of employees.

English Language Training:

• Improves the English language proficiency of the workforce.
• Aids employees in better communication, especially in international business contexts.

Foreign Workers Training:

• Enhances the skills of foreign workers.
• Ensures their contributions to the workforce meet necessary standards.

Small-and-Medium Enterprise (SME) Training:

• Provides support for SMEs to train their workforce.
• Aims to boost the competitiveness of SMEs in the market.

How Can Omni Help Malaysia Employees?

Investing in Human Resource development is a strategic move for business success. HRDF offers a dynamic range of support, encouraging lifelong learning and growth in the ever-competitive business landscape.

Omni makes it easier than ever to support Malaysia employees through the HRDF program.

Our centralized document management solution makes gathering the necessary data required to apply for HRDF assistance seamless and timely. With customized workflows and automated reminders, HR can help empower employees to manage the deadlines and documentation requirements for HRDF applications. And centralized documents and real-time data makes it easy for employees to access salary information and produce reports and documents necessary for verification.

Relevant reads: How to Apply, Claim, and Select Training Programs for HRDF Malaysia

Offering a comprehensive payroll solution tailored to Malaysia’s specific requirements with features like support for MYR, automated tax calculations, and managed HRDF allowances, Omni can help HR teams simplify their payroll processing and ensure compliance with ease.

Book a demo with our team to learn more about how Omni can support your Malaysia workforce.