If you’re hiring a foreign executive, manager, or specialist for your Malaysian company, the rules changed significantly this year. From 1 June 2026, the Employment Pass in Malaysia operates under a revised salary and duration framework — and getting the category, the sponsor company setup, or the routing between government portals wrong is the fastest way to a rejected application. This guide breaks down exactly what employers and expatriates need to know.
Key Takeaways
- The Malaysia employment pass now has three categories with substantially higher minimum basic salaries, effective 1 June 2026: RM20,000 (Category I), RM10,000–RM19,999 (Category II), and RM5,000–RM9,999 (Category III, RM7,000–RM9,999 for manufacturing).
- All salary thresholds apply to basic salary only — allowances, bonuses, and benefits-in-kind don’t count.
- Categories I and II are now capped at 10 years with the same employer; Category III is capped at 5 years.
- Category II and III sponsorships now require a mandatory succession plan documenting how the role will transition to a Malaysian employee.
- Since 16 March 2026, manufacturing and selected services companies apply through the new MIDA Expatriate System (MES); all other sectors continue through the Expatriate Services Division (ESD).
- Dependent Pass eligibility now extends to all three categories, including Category III, for applications submitted on or after 1 June 2026.
The Employment Pass (EP) is the primary work pass Malaysia issues to foreign professionals employed by a Malaysian company. Granted under the Immigration Act 1959/63, it authorises the holder to work for a specific employer, in a specific role, for a defined duration. Some agencies and employers also refer to it informally as the expatriate pass Malaysia companies use to sponsor senior foreign hires — it’s the same permit, just a different label.
Two developments reshaped how the EP works in 2026:
Any EP application — new or renewal — submitted on or after 1 June 2026 is assessed under the new framework, with no exceptions based on how long the employee has already been with the company.
Category | Minimum Basic Salary | Previous Minimum | Maximum Duration | Succession Plan | Dependent Pass |
Category I | RM20,000/month | RM10,000/month | 10 years | Not required | Yes |
Category II | RM10,000–RM19,999/month | RM5,000–RM9,999/month | 10 years | Mandatory | Yes |
Category III | RM5,000–RM9,999/month (RM7,000–RM9,999 for manufacturing) | RM3,000–RM4,999/month | 5 years | Mandatory | Yes (new for this category) |
Category I targets C-suite executives, regional directors, and senior technical experts. It carries the fewest ongoing obligations — no succession plan — but the salary floor has doubled.
Category II covers middle management, senior engineers, and specialist consultants. This tier absorbed the sharpest practical impact of the reform: roles previously paid RM6,000–RM9,000 a month, once comfortably within Category II, now fall below the new threshold and require either a salary adjustment or a role restructure.
Category III covers technical specialists and project-based staff. The trade-off for the higher salary floor and 5-year cap is a genuine upgrade elsewhere: dependents are now permitted for the first time, and the MOHA pre-approval step that previously slowed applications has been removed for new filings.
Every threshold above applies to basic salary exclusively. Housing allowances, transport allowances, bonuses, commissions, and benefits-in-kind are excluded from the calculation — even where they form a substantial part of total compensation.
An expatriate earning RM18,000 in total package but only RM9,000 in stated basic salary would not qualify for Category I, or even Category II. Employment contracts must state the basic salary figure clearly, and payroll records should consistently reflect it, since EPF contributions are calculated on this same figure.
This is a structural change that’s easy to underestimate. Categories I and II are now capped at 10 years with the same employer; Category III is capped at 5 years. A few mechanics matter here:
Companies with long-tenured expatriates should map out now when each holder reaches the ceiling, particularly where a promotion is planned that might reset the timeline in a way that’s actually helpful.
suggestion, and it applies to every Category II and III sponsorship. Per the published guidance, a compliant plan should include:
There’s no prescribed format and no fixed submission deadline — but the obligation is live, and failing to produce one when MOHA requests it will affect future applications. It’s worth starting this documentation well before a renewal is due rather than assembling it under time pressure.
Since 16 March 2026, expatriate applications route through one of two systems depending on the sponsor company’s sector:
MIDA Expatriate System (MES) | Expatriate Services Division (ESD) | |
Who uses it | Manufacturing and selected services companies under MIDA’s regulatory purview, holding a valid Manufacturing Licence, Interim Approval, or MIDA Incentive/Status/Grant Approval | All other sectors |
How it works | Applications submitted via Xpats Gateway, channelled into InvestMalaysia, covering post approval through ePass endorsement in one system | Existing ESD online portal process |
Passes covered | EP, EP for Foreign Graduates, PVP, Dependent Pass | EP and related passes for non-MIDA sectors |
Filing through the wrong system is one of the more common causes of delay this year, so confirming your sector classification before submission is worth the extra check. Companies that also hold a Sdn Bhd sponsor entity should have this confirmed at the same time as company incorporation planning, since paid-up capital and licensing requirements affect both.
Before any EP can be filed, the sponsoring Malaysian company must meet structural conditions:
Foreign founders setting up their own Sdn Bhd to sponsor their own EP should structure the incorporation and the EP application together, since paid-up capital and business activity classification directly determine which category and portal apply. If your business registration structure isn’t settled yet, our guide on private limited companies in Malaysia is a useful starting point before an EP filing is attempted.
Employers with EP holders whose passes expire in the second half of 2026 should treat this as urgent rather than routine, since the renewal window may fall right at the transition point.
The 2026 changes touch far more than immigration paperwork — they affect salary budgeting, payroll structuring, succession planning, and renewal timelines all at once. For companies managing a mix of local and expatriate staff, this is a good moment to have your payroll and HR advisory processes reviewed alongside your EP register, so that basic-salary reporting, EPF contributions, and succession documentation stay aligned from day one.
If your company is approaching an EP renewal, planning a first-time expatriate hire, or unsure whether MES or ESD applies to your sector, get in touch with our team for a review of your specific situation.
From 1 June 2026, the minimum basic salary is RM20,000 for Category I, RM10,000–RM19,999 for Category II, and RM5,000–RM9,999 for Category III (RM7,000–RM9,999 in manufacturing). These figures apply to basic salary only.
No. Only basic salary is assessed. Housing, transport, bonuses, and other allowances are excluded, even though they form part of total compensation.
Up to 10 years with the same employer for Categories I and II, and up to 5 years for Category III. The clock resets on an employer change or a category change.
It’s mandatory for Category II and Category III sponsorships, but not for Category I.
MES applies to manufacturing and selected services companies with valid MIDA licensing or approval. All other sectors continue through ESD.
Yes, across all three categories for applications submitted on or after 1 June 2026 — this is a new benefit for Category III specifically, which previously had restricted dependent eligibility.
