Malaysia’s Employment Pass rules changed on 1 June 2026, and the change is not cosmetic. Minimum salaries roughly doubled across all three categories. Pass durations are now capped. And from 1 January 2027, Category II and III passes come with a succession plan requirement.
For any organisation with expatriate talent in Malaysia, 2027 headcount planning starts here.
What changed on 1 June 2026
The revised expatriate salary policy was approved by Cabinet on 17 October 2025 and announced by the Ministry of Home Affairs on 14 January 2026. It applies to all new and renewal applications submitted on or after 1 June 2026.
| Category | Previous minimum monthly salary | Revised minimum (from 1 June 2026) | Maximum duration |
| Category I | RM10,000 and above | RM20,000 and above | Up to 10 years |
| Category II | RM5,000 – RM9,999 | RM10,000 – RM19,999 | Up to 10 years, with succession plan |
| Category III | RM3,000 – RM4,999 | RM5,000 – RM9,999 (RM7,000 – RM9,999 for specified manufacturing sectors) | Up to 5 years, with succession plan |
Two details matter for planning. First, renewals are not grandfathered. An existing pass holder who falls below the new floor must be brought up to it at renewal, or the role must change. Second, the salary test is widely reported as applying to basic salary, not total package. Allowances may not count.
The succession plan arrives in 2027
The Malaysian Investment Development Authority (MIDA) has confirmed that the succession plan requirement is being phased in. Submission and compliance with succession plans take effect from 1 January 2027.
The aim is a structured transfer of knowledge from expatriates to local employees over the life of the pass. In practice, that means every Category II and III role needs a named local successor, a development pathway and evidence of progress.
A change in how applications are filed
For companies in manufacturing and selected services under MIDA’s purview, the MIDA Expatriate System (MES) replaced the Expatriate Services Division (ESD) portal as the submission platform from 1 June 2026. Check which channel applies to each of your entities.
What it means for your cost base
Consider a Category II regional analyst on a basic salary of RM8,500. Under the old rules, that was comfortably within range. At the next renewal, the basic salary must reach RM10,000, a 17.6% increase, before any change in role.
Add the mandatory EPF contribution for foreign workers, introduced in October 2025 at 2% from the employer and 2% from the employee, and the total cost of an expatriate hire has moved twice in twelve months.
Six steps to plan 2027 headcount
1. Build a single register. List every pass holder by entity, category, basic salary and renewal date.
2. Cost the gap. For each renewal falling in 2027, calculate the basic salary uplift needed to stay in category.
3. Decide role by role. The options are to raise basic salary, re-grade the role, localise it, or relocate it to another hub.
4. Start succession plans now. The requirement applies from 1 January 2027. Identifying and developing successors takes longer than a filing cycle.
5. Track the tenure clock. With 10-year and 5-year caps, long-serving expatriates need exit or localisation plans well before the limit.
6. Restructure packages carefully. If basic salary must rise, review allowances and benefits so total cost stays defensible, and keep contracts consistent with what is declared.
Where data makes the difference
Each of these steps depends on accurate, connected people data: contract terms, basic salary history, pass dates and successor readiness. When that data sits in separate spreadsheets, renewal surprises are inevitable.
An enterprise HR and payroll platform such as MiHCM holds the employee record, compensation history and key dates in one place, so HR, finance and mobility teams plan from the same numbers.
Frequently Asked Questions
What are the new Employment Pass salary thresholds in Malaysia?
From 1 June 2026, the minimum monthly salary is RM20,000 for Category I, RM10,000 to RM19,999 for Category II, and RM5,000 to RM9,999 for Category III, or RM7,000 to RM9,999 in specified manufacturing sectors.
Do the new thresholds apply to renewals?
Yes. The revised thresholds apply to all new and renewal applications submitted on or after 1 June 2026.
When does the succession plan requirement start?
MIDA has confirmed that the requirement to submit and comply with a succession plan takes effect from 1 January 2027.
How long can an Employment Pass be held?
Category I and II passes can be held for up to 10 years, and Category III passes for up to 5 years. Categories II and III require a succession plan.
Do expatriates contribute to EPF in Malaysia?
Yes. Since October 2025, EPF contributions have been mandatory for foreign employees at 2% from the employer and 2% from the employee, excluding domestic workers.
Sources
• MIDA, Announcement: Implementation of New Expatriate Employment Policy
• Baker McKenzie, Malaysia: Increase in Employment Pass Salary Requirements (January 2026)
• Vialto Partners, Revision to the Employment Pass salary and duration policy from 1 June 2026
• Conventus Law, Succession Plan Deferred to 1 January 2027 and Transition from ESD to MES
