New HRDF fee will increase cost of doing business

 

From Roslan Sharif

The human resources ministry needs to urgently revisit the founding principles and objectives of the Human Resource Development Corporation (HRDC).

The HRDC was incepted in 1992 with the main aim of encouraging employers to provide learning and development opportunities to their employees to address productivity needs.

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This was to be done through the imposition and collection of a human resource development levy.

It is imperative to note that levy payments made to HRDC are payments made to a consolidated fund which the employers utilise for the benefit of their employees. Employers will typically use the levy as their annual training budget.

The June 15 circular (2/2022) from HRDC stipulates that it will charge employers a micro-credential fee of RM300 per trainee per training for almost all training conducted.

This effectively means that the employer will be upskilling fewer people in the organisation for the same amount that they have been contributing to HRDC on an annual basis.

Why do I say that?

Let’s take the annual contribution from all employers to HRDC to take a look at the impact on a broader perspective.

In 2019, the annual contribution was RM900 million.

Before the new circular, a firm’s annual contribution of RM144,000 to the HRDF meant it could conduct 12 sessions of two-day courses each for 20 employees each time. This is based on the cost of RM12,000 for each session. The total number that can be trained will be 240 employees.

With the new fees, each session will now cost RM18,000. This means for a contribution of RM144,000, a firm can only have eight sessions. And this means only 160 employees can be trained.

That’s a 33% reduction in people being upskilled in an organisation.

Using the old formula as outlined above, the said amount will be able to fund around 75,000 sessions per year. With the cost of the micro-credential fee factored in, this goes down to 50,000 sessions per year.

Tens of thousands of employees not being upskilled annually due to this new fee does not augur well for industries.

As a human resources leader in a multinational company, we are more focused on actual skills acquisition rather than certificates.

We are more concerned about how employees are able to deliver actual value to the business through their capabilities and skills rather than bringing certificates into the business.

It may not be obvious now but I can imagine the kind of difficult conversations my fellow human resources leaders will encounter with their respective managing directors and country heads.

They have to try and explain as to why they will now be forced to upskill fewer people while paying the same amount to HRDC, and why the training budget will need to be revised halfway through the fiscal period to execute activities planned earlier — which will now impact the sensitive topic of profit and loss.

This is no small matter to be swept under the carpet as it is going to increase the cost of doing business.

This is the danger when a regulator unilaterally changes its focus to being a profit centre. The interests of the regulator can take precedence over its main contributing stakeholders.

The employers are compelled by law to contribute and now the employers have no say in how to train their employees.

Revenue streams are created by enforcing unilaterally new policies and regulations which favour the regulator at the expense of the stakeholders’ interests and, potentially, Malaysia’s long-term competitiveness from the aspect of workers’ capability.

With most businesses struggling with post- Covid-19 effects such as increased costs due to the weak demand, global logistics backlog, raw material shortages, increased minimum wages and supply chain chaos, the HRDC appears to be oblivious to the ramifications of a lower number of qualified people.

While the Malaysian Employers Federation (MEF), Federation of Malaysian Manufacturers (FMM), SME Association of Malaysia and other representatives on the HRDC board may have been consulted, the information provided by them has been inadequate.

Furthermore, HRDC needs to recognise the fact that the foreign direct investors have their own trade and business chambers, namely the American Malaysian Chamber of Commerce (AMCHAM), Malaysian Italian Chamber of Commerce (MITCCI), Malaysian German Chamber of Commerce (MGCC), Japan Chamber of Commerce and Industry of Malaysia (JACTIM) and others.

Please engage and collaborate with all stakeholders, including these foreign chambers, before making unilateral decisions that may be akin to shooting our own feet.

The loss of 500,000 sessions, up to a value of RM300 million of the employers’ money, meant for development of their own talent, can create frustration and a loss of confidence in our talent competitiveness.

What we need is for HRDC to engage and facilitate rather than frustrate the foreign and domestic stakeholders if we value and welcome them. - FMT

Roslan Sharif is a human resources director for a multinational company in Penang and an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.