How to enable the HRDF levy in PayrollPanda?

The HRDF levy is a mandatory levy payment imposed by the Government on specified groups of employers for the purpose of employee training and skills upgrading. 

To know who is eligible to contribute, check this article out. 

HRDF contributions are disabled by default. The setting can be modified as follows:

  1. Go to Settings 
  2. Choose Payment Settings
  3. Select one of the available options for HRDF contributions.

Four types of options are available for you to choose from the drop-down menu: None, Automatic, 0.5% and 1%.

If HRDF is set as Automatic, the app will calculate the contribution based on the following rates:

  • 5 to 9 Malaysian employees: HRDF contribution of 0.5%
  • 10 and more Malaysian employees: HRDF contribution of 1%

Please note, as per HRDF regulations, once you reach 10 Malaysian employees you must continue contributing at 1% for the whole calendar year even if your headcount falls to fewer than 10 employees during the year.


The HRDF contribution is calculated based on basic salary plus any fixed allowances EXCEPT

  • Travel/Petrol Allowance (Official Duties)
  • Travel/Petrol Allowance (Records Kept For 7 Years)
  • Internship Allowance

If a payroll item is added under the Allowance category as a recurring payroll item, it will also be included in the calculation. For more information regarding recurring payroll items, see this help article.

Take note that the following payroll items will affect the HRDF calculation:

  • Leave Pay, Advance Payment, Arrears of Salary & Arrears of Wages: These payroll items are found under the Remuneration category. 
  • Unpaid Leave: This help article shows you how to set unpaid leave in the app.
  • Advance (Payment Made via payroll) & Salary Adjustment: Adjust salaries and pay back advance payments under the Deduction category.
  • Employer HRDF Levy (Custom): If you wish to increase the HRDF contribution amount, you can do so by choosing this preset payroll deduction.


Example of HRDF levy calculation:

If you are contributing 1% and your employee earns RM3,000 plus a fixed allowance of RM250, the calculation for the HRDF levy is as follows: 

(RM3,000 + RM250) * 1% = RM32.50


That’s all for now! Check out other related articles below. If you need help, contact our support team!


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