On 14 June 2025, at the opening of National Training Week at Bukit Jalil, the Prime Minister announced a one-year exemption from the Human Resource Development (HRD) levy for all private education institutions, running from 1 January 2026 to 31 December 2026. The exemption is now in effect. Private preschools, primary and secondary schools, vocational training centres and higher education institutions that are normally registered with HRD Corp and liable to pay the levy will not be required to make those payments during this period.
What the HRD levy is
The HRD levy is the monthly contribution that employers in specified industries must pay into the Human Resources Development Fund (Kumpulan Wang Pembangunan Sumber Manusia), administered by Pembangunan Sumber Manusia Berhad (now known as HRD Corp) under the Pembangunan Sumber Manusia Berhad Act 2001. It is currently set at 1% of the monthly wages of each Malaysian employee for employers with ten or more employees in a covered industry, with an optional 0.5% rate available to smaller employers who voluntarily register. Private education has been a covered industry for some years; it is why a preschool with a payroll of any size has typically been issued with an HRD Corp employer number and a monthly levy bill.
The levy is collected to fund the training, upskilling and reskilling of the Malaysian workforce. Employers who have paid the levy can, in turn, apply for training grants to be disbursed from the Fund.
Who the exemption covers
The Prime Minister’s announcement extended the exemption to 1,668 private education institutions, covering a total levy value of approximately RM46 million. Subsequent reporting during the 2026 rollout has put the figures at around 3,500 employer accounts and RM35 million in actual levy relief, reflecting the narrower set of institutions that are registered and active payers in any given year. The policy scope, however, is broad: preschools, primary and secondary schools, vocational and TVET providers, colleges, and universities, whether for-profit or not-for-profit, if they are registered under the Education Act 1996 or the Private Higher Educational Institutions Act 1996 and have previously been liable to the HRD levy.
What institutions should still do
The exemption is a waiver of the monthly levy for the twelve calendar months of 2026. It is not a deregistration. The practical points are three.
Continue to file returns. In our experience, HRD Corp still expects registered employers to submit their monthly Form 2 declarations through the employer portal even when the amount payable is zero. Filing a nil return is what documents the exemption; simply not filing may generate arrears notices when the exemption ends.
Plan for the resumption. Levy payments for January 2027 will fall due on 15 February 2027 on the ordinary schedule. Institutions that had been absorbing the levy as a payroll cost should budget for that resumption rather than let it arrive as a surprise.
Use the year for training, not cost-cutting. The stated rationale of the exemption is to free institutions to invest in quality. Existing balances in an employer’s HRD Corp levy account remain claimable against approved training throughout the exemption period. The first question worth asking is not “how much do we save” but “what training can we now run with the accumulated balance”.
If your institution is uncertain whether it qualifies
Because the exemption is being administered by HRD Corp rather than by a legislative amendment, the authoritative source on scope, application and documentation is the HRD Corp employer portal and circulars at hrdcorp.gov.my. Institutions that have not heard directly from HRD Corp about the exemption, and that believe they ought to fall within it, should write to HRD Corp citing the 14 June 2025 announcement and asking for written confirmation of their status for the 2026 levy year. The confirmation is worth having on file.
This article is provided for informational and educational purposes only and does not constitute legal advice. It reflects the position as at the date of publication and may be affected by subsequent changes in the law. The specific facts of each situation differ, and readers are encouraged to consult a qualified advocate and solicitor. This information is intended to educate readers and should not be construed as advertising or solicitation of legal services.