Malaysia Revises Its Expatriate Employment Policy

Malaysia will implement revisions to its expatriate employment framework from June 1, 2026, updating how foreign professionals are hired, compensated, and retained under the Employment Pass system.

Why is Malaysia adjusting its expatriate framework?

The policy revision is driven by structural labor market considerations specific to Malaysia. Authorities have highlighted persistent salary compression between expatriate and senior local roles, as well as the repeated renewal of Employment Passes in sectors such as manufacturing, shared services, and professional services, where local talent pipelines have matured, but succession outcomes have lagged.

By recalibrating both compensation thresholds and employment duration, the revised framework seeks to narrow expatriate eligibility to genuinely senior or specialist roles, while strengthening expectations around skills transfer and progression of Malaysian professionals into leadership positions.

Revised salary thresholds under the new framework

Minimum salary requirements for expatriate Employment Pass holders will increase across all categories. Category I roles will require a minimum monthly salary of RM20,000 (US$4,900), doubling the previous threshold of RM10,000. Category II positions will fall within a range of RM10,000 to RM19,999 (US$2,450 to US$4,900) per month. Category III roles will be set between RM5,000 and RM9,999 (US$1,230 to US$2,450).

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In the manufacturing and manufacturing-related services sector, Category III roles will carry a higher minimum starting point of RM7,000 (US$1,720) per month. These revised salary bands more clearly separate expatriate roles from local professional positions and align compensation with role seniority and specialization.

Introducing defined limits on expatriate tenure

The revised framework introduces clear limits on how long expatriates may remain employed under each Employment Pass category. Category I and Category II passes may be issued for up to 10 years, with Category II approvals linked to local succession planning. Category III passes will be capped at 5 years, with expectations around knowledge transfer.

Previously, expatriate employment could be renewed without a defined endpoint. The introduction of tenure limits reframes expatriate roles as time-bound positions rather than indefinite appointments.

What this policy change signals for Malaysia

The revised salary thresholds and defined employment durations indicate a clearer positioning of expatriate labor within Malaysia’s workforce model. Expatriate roles are being narrowed toward senior and specialist functions, with reduced overlap with mid-level local professionals, while tenure limits reinforce expectations around skills transfer and succession rather than long-term reliance.

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