The 15% that quietly leaves your account
If you employ ten or more people in an eligible Malaysian sector, you contribute 1% of monthly payroll to HRD Corp. Voluntary registrants pay 0.5%. That money sits in a levy account with your company's name on it and most employers treat it as a tax.
Since March 2025 it hasn't behaved like one. HRD Corp now deducts 15% of unused levy balances where two conditions are both met: your balance exceeds RM50,000, and your training utilisation falls below 50% of annual contributions. The deducted portion goes into a pooled industry training fund, which is to say, it funds somebody else's training. On a RM120,000 annual contribution, you need to claim at least RM60,000 in approved training to stay clear of the rule.
Plenty of Malaysian employers contribute for years and claim almost nothing. That was always poor practice. Now it has a price, and the price is charged automatically against a balance most finance teams only look at once a year, in a statement that arrives after the window to do anything about it has closed.
Related reading: Malaysia's Digital Talent Strategy and MDEC Incentives in 2026 Β· Thailand's Corporate Training Market in 2026: A Buyer and Vendor Guide Β· The Philippines' EBET Act in 2026: How BPO Firms Fund AI Reskilling.
SBL-KHAS, and what "100% claimable" really means
The scheme most employers should be using is SBL-KHAS, under which approved training can be reclaimed at up to 100%, with the provider billing HRD Corp directly rather than you paying and waiting for reimbursement. For 2026, HRD Corp raised the limits on AI, data and automation courses specifically, which is the clearest signal it has sent about where it wants the fund spent.
Two cautions on the phrase "100% claimable", because vendors use it loosely. First, it applies to approved programmes from registered providers, and approval is programme-specific rather than provider-wide. A registered training provider can absolutely sell you an unapproved course. Second, the claimable amount is capped by scheme rules and by what's left in your levy account, so a large programme can be fully approved and still only partly funded if your balance is thin.
Third, and this one costs employers most often: grant applications generally need to be submitted and approved before the training runs. Retrospective claims are the single most common rejection reason in the Malaysian market. A programme delivered in March and filed in May is usually just an expense, however approved the course and however registered the provider.
Claimable expenses reach further than most HR teams assume. LMS access, virtual instructor-led delivery, online course licences, microlearning, and learning analytics can all qualify when they form part of an approved digital training grant. If you're paying for an LMS out of the IT budget while under-utilising your levy, you're making a filing error that costs real money.
The Budget 2026 stack
The one properly new thing this year is the additional 50% tax deduction introduced in Budget 2026 for MSME spending on AI and cybersecurity training certified by MyMahir, under the National AI Council for Industry, which TalentCorp and MyDIGITAL lead jointly.
Stack that against HRD Corp funding and the net cost of upskilling a Malaysian team gets low enough that the objection stops being budget and starts being calendar. Which, incidentally, is the real constraint for most companies and always has been.
| Instrument | Who qualifies | What it covers | Where employers get it wrong |
|---|---|---|---|
| HRD Corp levy, 1% of payroll | Eligible sectors, 10+ employees | Your own training fund | Treating it as a tax and never claiming |
| SBL-KHAS | Registered contributing employers | Up to 100% of approved programmes | Assuming provider registration equals programme approval |
| SME Skills Scheme | Smaller registered employers | Dedicated SME allocation | Not applying because the levy balance looks small |
| Budget 2026 AI and cyber deduction (extra 50%) | MSMEs, MyMahir-certified training | Tax deduction on qualifying spend | Booking the spend before checking certification |
| 15% unused-balance deduction | Applies to you, not for you | Balance over RM50,000, utilisation under 50% | Discovering it in the annual statement |
A calendar that keeps you above the line
The employers who use this well run it on a rhythm rather than a scramble. Something like this works:
- January: pull the levy balance and last year's utilisation rate. If utilisation was under 50% and the balance is heading past RM50,000, you have a problem with a deadline.
- February: agree the year's training plan against business priorities, then check which items are claimable. Not the other way round. A plan built backwards from what's claimable produces a portfolio of cheap courses nobody needed.
- March through October: run cohorts, file grant applications before each programme starts rather than after, and keep the attendance and assessment records the audit will ask for.
- November: review utilisation with a quarter left to fix it. This is the month that separates employers who stay above 50% from those who don't.
A Penang electronics manufacturer I'm aware of ran exactly this and went from 22% utilisation in 2024 to just over 70% in 2025, mostly by moving three programmes they were already buying onto approved status and filing the applications properly. No new budget. Same training. The finance director's summary, roughly: they'd been paying for it twice and using it once.
The detail that made it work was unglamorous. They gave one person in HR explicit ownership of the levy account, with the utilisation rate on their objectives, and that person started attending the quarterly operations review. Utilisation problems are almost never knowledge problems. They're ownership problems, and levy accounts tend to belong to everybody and therefore to nobody.
What if your levy balance is small?
Then your problem is the opposite one, and the advice inverts.
A company with 15 staff on modest salaries contributes a levy that won't fund much. The 15% deduction rule is irrelevant to you, because you'll never sit on a RM50,000 balance. What matters instead is the SME Skills Scheme, which exists precisely for this situation, and the Budget 2026 MSME deduction, which is a tax instrument rather than a fund and therefore doesn't care how small your levy account is.
Smaller employers routinely skip both, and the reason given is always time. Filing a grant application for a RM8,000 course feels like more administration than it's worth when the person filing it is also doing payroll and hiring. That's a fair complaint and it's usually wrong on the arithmetic. Two hours of work to recover most of an RM8,000 cost is a better hourly rate than almost anything else in a small company's week.
The workaround worth knowing: several Malaysian industry associations and chambers run shared cohorts where the administrative burden sits with the organiser and member firms send two or three people each. You get the approved-programme status without building the filing capability. For a company under 50 staff, that's usually the right route, and it has the side benefit of putting your people in a room with peers from other firms, which is half the value of external training anyway.
Picking providers without getting played
"HRD Corp claimable" is the most over-used phrase in Malaysian training sales, and it isn't a quality signal. It's an administrative status. Some of the weakest training in the market is fully claimable, and the fact that HRD Corp will pay for it doesn't make it worth your people's time.
Screen for three things instead. Ask which specific programme codes are approved, and get the codes rather than a reassurance. Ask who is delivering, by name, and whether that person is the one in the proposal. Then ask for two Malaysian client references from the last twelve months with a described outcome, not a testimonial. Providers who clear all three exist in reasonable numbers, and the screen takes an afternoon.
One more filter, for AI training specifically: ask whether the programme is MyMahir-certified. If the provider doesn't know what you mean, they've not been paying attention to the incentive that changed this year, which tells you something about how current the rest of their offer is.
Where to start if you're behind
Pull your levy statement this week. If the balance is over RM50,000 and last year's utilisation was under half, you have a specific, quantifiable amount of money at risk and a finance director who will find that conversation more interesting than the usual training business case.
Resist the urge to fix utilisation by buying whatever is easiest to claim. A rush of generic compliance courses in November will move the percentage and teach your people nothing, and you'll do it again next year because the underlying plan never existed. The rule was written to push employers toward training, not toward filings, even if filings are the easier thing to produce under deadline.
Then pick the single programme your operations leads have been asking for and get it approved properly. One well-run claim teaches your HR team the process, and the process is the hard part, not the training. After that it repeats.