Further to our recent client alert, the Expatriates Service Division (ESD) has issued an official announcement regarding the revision to the salary policy and maximum pass duration for expatriates. The revised expatriate salary policy will apply to Employment Pass (EP) Categories I, II, and III, and the implementation will take effect from 1 June 2026.
Under this new policy, the revised minimum salary thresholds and the maximum duration applicable to each EP Category will be as follows:
| EP Category | Current minimum salary | Current Employment Pass duration | Revised minimum salary (Effective 1 June 2026) | Revised Employment Pass duration (Effective 1 June 2026) |
| Category I | RM10,000 and above | Up to 5 years (no cap on the renewal) | RM20,000 and above | Up to 10 years |
| Category II | RM5,000 – RM9,999 | Up to 2 years (no cap on the renewal) | RM10,000 – RM19,999 | Up to 10 years (with succession plan) |
| Category III | RM3,000 – RM4,999 | Up to 1 year (renewable for up to 2 times only) | RM5,000 – RM9,999
RM7,000 – RM9,999 (for Manufacturing Related Services (MRS) only) | Up to 5 years (with succession plan) |
The above salary thresholds and maximum duration will apply across all sectors, with a specific threshold for the MRS sector. The MRS sector encompasses a wide range of activities that support and complement manufacturing activities throughout the supply chain and value chain, which include research and development services, conformity assessment services, transport and logistics services; and global establishments.
A structured succession plan will be a mandatory component for EP Category II and III holders, reinforcing the prioritisation of, and transition towards, local talent development. The transfer of knowledge and skills are expected to take place during the validity of the expatriate’s EP, and the extension of the pass duration will be subject to case-by-case evaluation.
The rationale behind the implementation of this policy is to ensure that the employment of expatriates is managed in a more strategic, balanced, and targeted manner, while prioritising the development of local talent without undermining Malaysia’s economic competitiveness. Companies are advised to reassess the salary structures of their existing and future expatriate population, localisation and succession planning for the relevant roles, and long-term workforce strategies ahead of the implementation to avoid disruption to the business.
Additionally, companies will need to consider the relevant Employees’ Provident Fund (EPF) and tax implications in relation to the revised salary requirements for their expatriate employees after 1 June 2026.
Our team can assist in assessing the impact of the revised EP salary thresholds on your existing and future expatriate population, including identifying potential risks and advising on strategic options to maintain compliance with immigration requirements. Additionally, we can provide guidance on workforce planning, compensation alignment, EPF and tax implications and alternative immigration pathways where applicable.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Sasha Reddy
Partner
Hana Rabi
Senior Manager
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