Malaysia’s Employment Pass (EP) framework is undergoing one of its most significant policy updates in recent years. Following Cabinet approval on 17 October 2025, the Ministry of Home Affairs (MOHA) has introduced revised salary requirements that will reshape how expatriates are hired and retained.
Against this backdrop, Malaysia implemented significant changes to its Employment Pass (EP) framework effective from 1 June 2026. The reforms raise the salary thresholds for Employment Passes. For Category I, the minimum salary doubled from RM10,000 to RM20,000 per month, alongside new requirements for certain Employment Pass categories.
This guide outlines the 2026 Malaysia employment pass reforms, their impact on businesses, and recommended preparation steps.
What Is a Malaysia Employment Pass?
The Malaysia Employment Pass (EP) is a work permit for foreign professionals, managers, executives, and technical specialists employed by Malaysia companies. It authorises qualified expatriates to live and work in Malaysia for a specified period.
The EP is commonly used by multinational corporations, foreign-owned companies, regional headquarters, technology firms, manufacturing businesses, and other businesses that require specialised expertise not readily available in the local labour market.
What Are the Key Employment Pass Changes in 2026?
Malaysia’s 2026 Employment Pass reforms represent one of the most significant updates to the country’s expatriate employment framework in recent years.
The key changes include:
- Higher minimum salary requirements across all Employment Pass categories.
- Mandatory succession plans for Category II and III Employment Pass holders.
- Defined employment duration limits to encourage local talent development.
- The new rules apply to applications for new or renewal submitted on or after 1 June 2026.
- Existing Employment Pass holders may be subject to separate transitional arrangements announced by the authorities.
Malaysia Employment Pass 2026: New Salary Requirements and Pass Categories
One of the most notable aspects of the reform is the substantial increase in minimum salary thresholds.
| Employment Pass Category | Previous Salary Threshold | New Salary Threshold | Maximum Validity |
|---|---|---|---|
| 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 |
| Category III | RM3,000 – RM4,999 | RM5,000 – RM9,999 | Up to 5 years |
Note: Subject to a mandatory succession plan.
Example: Impact of New EP Salary Rules (2026)
For example, under the 2026 Employment Pass update, a Category II employee earning RM8,000 per month would no longer qualify, as the new threshold is RM10,000–RM19,999 per month. The employer must either increase the salary or reassign the role to remain compliant.
Similarly, Category I now requires a minimum of RM20,000 per month (up from RM10,000), directly affecting senior expatriate hires and increasing overall payroll costs.
Mandatory Succession Planning Requirements
Employers hiring under Categories II and III must submit a succession plan detailing how local employees will be prepared to assume expatriate roles. The plan must include:
- Identification of roles designated for localisation
- Initiatives for knowledge transfer
- Training and mentoring programs
- Defined implementation timelines
Non-compliance with an approved succession plan may negatively impact future Employment Pass applications.
Employment Duration
Malaysia has established maximum employment durations for Employment Pass holders to decrease reliance on expatriates and enhance the capabilities of the local workforce.
How Will the New Employment Pass Rules Impact Businesses?
The revised Employment Pass policy is expected to generate both financial and operational implications for employers. For organisations that depend on foreign professionals, these changes may influence hiring decisions, budget planning, and long-term talent management strategies.
1. Higher Hiring and Retention Costs
The most immediate consequence is the increase in minimum salary thresholds. For example, a Category II employee currently earning RM8,000 per month will require a salary increment of at least RM2,000 to remain eligible under the new framework. Companies employing multiple expatriate pass holders are likely to experience a substantial increase in payroll expenses.
2. Strategic Deployment of Foreign Talent
Succession planning has become mandatory for Category II and III Employment Pass holders. Employers are required to identify local successors, implement training programs, and document knowledge transfer initiatives, thereby reinforcing Malaysia’s commitment to local talent development.
3. Additional Succession Planning Requirements
Businesses should integrate succession planning into their workforce and Malaysia immigration compliance strategies to facilitate future Employment Pass applications and renewals.
4. Increased Focus on Renewals
Any Employment Pass application or renewal submitted on or after 1 June 2026 must comply with the revised requirements. Employers should review upcoming renewals early to identify employees who may be affected by the new salary thresholds.
5. Impact on Expansion and Workforce Budgets
Businesses planning to incorporate in Malaysia or expand operations should factor increased workforce costs into their financial projections and recruitment plans.
How to Prepare for Malaysia’s Employment Pass Reforms?
Businesses should proactively manage compliance, workforce planning, and increasing employment costs.
| Priority Area | Recommended Action |
|---|---|
| Review Current Workforce | Identify expatriate employees affected by the new salary thresholds and assess potential cost implications. |
| Plan for Renewals | Review upcoming Employment Pass renewals and address any salary or eligibility gaps before submission. |
| Update Workforce Budgets | Factor higher salary requirements into hiring plans, compensation reviews, and future workforce costs. |
| Implement Succession Plans | Develop knowledge-transfer and localisation plans for Category II and III Employment Pass holders. |
| Evaluate Expansion Plans | Incorporate the revised Employment Pass requirements into market entry, hiring, and growth strategies. |
| Strengthen Compliance | Ensure Employment Pass applications, documentation, and workforce records meet the latest requirements. |
| Seek Expert Support | Work with corporate, immigration, or HR advisors to navigate the transition and reduce compliance risks. |
Conclusion
Malaysia’s new Employment Pass policy significantly alters the country’s approach to expatriate employment. Higher salary thresholds, mandatory succession planning, and set employment-duration limits require businesses to review their workforce strategies, hiring budgets, and compliance obligations.
As a trusted corporate services provider, 3E Accounting Malaysia assists businesses with Employment Pass applications, immigration compliance, payroll planning, and workforce structuring, helping companies adapt smoothly to Malaysia’s evolving regulatory.
If you are hiring foreign professionals, establishing a new business presence, or reviewing your workforce structure, our team can help ensure compliance while supporting your long-term business objectives in Malaysia.
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Frequently Asked Questions
A Malaysia Employment Pass (EP) is a work visa issued to foreign professionals, executives, managers, and technical specialists employed by a Malaysia company. It allows eligible expatriates to live and work in Malaysia for a specified period.
Yes. Businesses sponsoring Category II and Category III Employment Pass holders must implement a succession plan that outlines how skills and knowledge will be transferred to Malaysia employees over time.
To obtain a Malaysia Employment Pass, a Malaysia company must sponsor the foreign employee and submit an application to the relevant authorities. The applicant must satisfy the relevant salary threshold, hold the necessary qualifications and experience, and provide all required supporting documentation.
Malaysia has updated the minimum monthly salary requirements for Employment Pass (EP) applicants. Category I now requires at least RM20,000 per month. Category II ranges from RM10,000 to RM19,999. Category III requires RM5,000 to RM9,999, with a higher minimum of RM7,000 for certain manufacturing and related services roles.
Abigail Yu
Author
Abigail Yu oversees executive leadership at 3E Accounting Group, leading operations, IT solutions, public relations, and digital marketing to drive business success. She holds an honors degree in Communication and New Media from the National University of Singapore and is highly skilled in crisis management, financial communication, and corporate communications.
