HRD Corp Registration: Which Employees Count Toward Malaysia’s 10-Employee Threshold?

A covered employer must register with HRD Corp once it has 10 Malaysian citizen employees, and can choose to register with five to nine. Permanent residents and foreign staff don’t count toward either number, and the count belongs to the entity that actually employs the staff, which under an Employer of Record is the EOR rather than you.

Registration brings a monthly levy of 1% of those employees’ basic salary and fixed allowances, or 0.5% for voluntary registrants. This guide is for companies building a team in Malaysia, whether through their own entity or an EOR.

Verified against HRD Corp guidance on 21 October 2026.

Who must register

Since 1 March 2021, HRD Corp’s coverage extends to employers across almost every private-sector industry, from agriculture and manufacturing to services, education and healthcare (HRD Corp, expansion of the PSMB Act). Within those industries, the 2021 First Schedule order sets two thresholds:

• 10 or more Malaysian employees: registration is compulsory, with a levy of 1%.
• 5 to 9 Malaysian employees: registration is optional, with a levy of 0.5%.

NGOs carrying out listed activities (labour unions, religious and political organisations, nursing and welfare care, social work without lodging) fall into the optional category once they have five or more employees. Federal and state government, local councils and statutory bodies are outside the scheme.

Who counts toward the threshold

HRD Corp defines an employee as “any citizen of Malaysia who is employed for wages under a contract of service”, excluding domestic servants (HRD Corp FAQ). Citizenship is the test that decides most cases: a team can be large and still sit below the threshold.

Whose headcount it is

The obligation sits with the employer: the person or entity that has entered into the contract of service (HRD Corp, registered employers). So the starting point is whoever actually holds the employment contracts, not the size of a team or a group.

• Subsidiaries and branches. A Malaysian subsidiary is its own employer. A branch is part of the same company, so a separate office address doesn’t make it a separate employer. Staff shared or seconded across a group depend on whose contracts they hold.
• Foreign companies registered in Malaysia. Foreign ownership is no exemption. HRD Corp’s registration checklist has a category for foreign companies, with its own supporting documents (HRD Corp FAQ).
• Hiring through an Employer of Record. The EOR’s Malaysian entity employs the staff, so the registration and the headcount that triggers it belong to that entity and its whole workforce. This assumes the EOR genuinely employs the staff rather than only processing their payroll. A client with two people through an EOR can’t assume no levy applies just because its own team is small, and how the levy shows up in an EOR’s fees is a contractual question.

What the levy costs

The levy is calculated on each counted employee’s basic salary, less unpaid leave, plus fixed allowances paid in cash, including leave pay and wage arrears (HRD Corp levy guidance). Bonuses, commissions, gratuities, overtime, shift and other non-fixed allowances, and travel allowances are excluded. The employer pays it: it can’t be deducted from wages. Each month’s levy is due by the 15th of the following month, so January’s levy is due by 15 February.

A worked example: a Malaysian subsidiary in a covered industry employs 18 people.

If the 12 citizens’ basic salaries and fixed allowances come to RM90,000 a month, the levy is 1% of that: RM900 a month, or RM10,800 a year if the base stays the same. Their bonuses and overtime, and the pay of the other six people, add nothing. For a fuller picture of employment costs, the Malaysia labour cost calculator gives an overall estimate per employee.

Registering, and by when

An employer that becomes liable has 30 days to submit Form 1, under regulation 4(2) of the registration regulations (HRD Corp general guidelines). The form is filed online and asks for the date the employer reached the threshold, its current number of Malaysian employees, and the previous month’s Malaysian headcount and wages (Form 1 guide). An EPF statement is the usual evidence of headcount.

Only HRD Corp decides eligibility, and it won’t confirm by phone or email; a Form 1 submission gets a formal answer, and HRD Corp aims to process complete applications within three days (HRD Corp new employer FAQ). The obligation runs from reaching the threshold, not from receiving a reminder. If one does arrive, it needs a response even below 10 employees.

When headcount rises or falls

The rate follows the category, and HRD Corp’s rules here are not symmetrical (HRD Corp, changes of employees and levy rate):

• A voluntary registrant that reaches 10 employees moves to 1% straight away and stays there until the end of that calendar year. It returns to 0.5% from January if it’s below 10 again.
• A compulsory registrant that falls below 10 stays at 1%. Headcount dropping doesn’t lower the rate.

Leaving the scheme is a separate application. An employer below the minimum for three consecutive months can apply to deregister using Form 4A, with three months of EPF statements, no levy or interest owed, and no training run after submitting the form (HRD Corp, employees reduced to less than 10). Until it’s approved, the levy continues.

Cases that need a closer look

Part-time staff near the threshold

HRD Corp’s current levy guidance speaks of full-time staff, while its older guidelines counted part-timers. When part-time citizens are what would take a count from nine to ten, a Form 1 submission gets HRD Corp’s answer for that arrangement.

Staff shared across a group

Secondments, shared-services companies and staff who work for several entities don’t fit a simple per-entity count. The contracts decide whose headcount they belong to, so that’s where to start rather than with an org chart.

Short dips around 10

Form 1 records the date the threshold was reached, but HRD Corp doesn’t set out how a brief rise or fall within a month is treated. Dated payroll and EPF records showing when headcount changed make either conversation with HRD Corp straightforward.

Penalties

According to the HRD Corp FAQ, an employer that fails to register can, on conviction, be fined up to RM10,000, imprisoned for up to one year, or both. Failing to pay the levy carries up to RM20,000, two years, or both, plus interest at 10% a year for each day of delay. Not responding to an HRD Corp reminder can also be compounded up to RM2,000 under regulation 4A.

How NNRoad supports this

For a company hiring in Malaysia without its own entity, an Employer of Record employs the team through its Malaysian entity, so employer obligations such as HRD Corp registration sit with that entity rather than with you. If you’re comparing options, see how NNRoad’s Employer of Record service in Malaysia works, and ask any provider how statutory levies are reflected in its fees.

Frequently asked questions

Is HRDF the same as HRD Corp?

Yes. HRDF became HRD Corp in April 2021, and the new name was officially launched on 2 December 2021 (HRD Corp). The levy still comes from the Pembangunan Sumber Manusia Berhad Act 2001.

Can the levy pay for our team’s training?

Registered employers can apply for HRD Corp support for employee training, under each scheme’s approval rules. The levy isn’t a balance the employer can draw on freely.