Malaysia's 2026 Expat Policy: Higher Salaries, Time Limits, Local Talent Focus
In a significant move to reshape its labour market, the Malaysian government has announced a comprehensive overhaul of its expatriate employment polic...
In a significant move to reshape its labour market, the Malaysian government has announced a comprehensive overhaul of its expatriate employment policy, set to take effect on June 1, 2026. The new regulations, unveiled by the Ministry of Home Affairs, introduce substantially higher minimum salary thresholds and impose fixed employment duration limits for foreign workers. This strategic initiative is designed to prioritise the development and employment of qualified local talent, aligning with the broader objectives of the 13th Malaysia Plan to reduce the nation's dependency on foreign labour.
The policy revision represents a pivotal shift in Malaysia's approach to managing its expatriate workforce. By restructuring the salary and employment duration rules across three distinct Employment Pass categories, the government aims to create a more balanced and sustainable employment ecosystem. The changes are not merely administrative but are intended to foster a long-term strategy that encourages knowledge transfer and skill development among the local population.
Under the newly outlined framework, the salary thresholds for expatriates have been significantly elevated. For Category I, the minimum monthly salary has been doubled from RM10,000 to RM20,000, with a maximum employment duration capped at 10 years. Category II sees its salary range adjusted from RM5,000-RM9,999 to RM10,000-RM19,999, also subject to a 10-year limit, contingent upon the implementation of a succession plan. Category III, which now spans a salary range of RM5,000-RM9,999 (up from RM3,000-RM4,999), faces a stricter maximum employment duration of 5 years, again requiring a succession plan. Notably, the manufacturing sector within Category III will adhere to a higher minimum of RM7,000, reflecting sector-specific considerations.
The introduction of employment duration limits is a cornerstone of this policy overhaul. According to the Ministry of Home Affairs, these limits are strategically designed to provide employers with a clear and structured framework for developing robust succession plans that integrate the local workforce. This approach acknowledges the valuable contributions of highly skilled expatriates while ensuring that their presence serves as a catalyst for upskilling Malaysian employees. By setting explicit time boundaries, the policy encourages organisations to proactively plan for leadership and technical transitions, thereby fostering a more self-reliant talent pipeline.
In a move that balances regulatory changes with humanitarian considerations, the policy maintains provisions for expatriates to bring their dependants. This continuity ensures that Malaysia remains an attractive destination for international professionals, even as it tightens its employment criteria. The government's decision to allow a transition period until June 1, 2026, underscores its commitment to a smooth implementation. This lead time is intended to give employers and industries ample opportunity to adjust their hiring practices, review existing expatriate contracts, and develop compliant succession strategies.
To facilitate this transition, the Ministry of Home Affairs has pledged to conduct extensive briefing and engagement sessions with all stakeholders, including businesses, industry associations, and expatriate communities. These sessions will elucidate the implementation mechanisms, address concerns, and provide guidance on adhering to the new requirements. Such proactive engagement is crucial to mitigating potential disruptions and ensuring that the policy achieves its intended outcomes without adversely affecting Malaysia's economic competitiveness.
The policy's alignment with the 13th Malaysia Plan highlights its role in a broader national development strategy. By reducing reliance on foreign labour, Malaysia seeks to enhance the employability and career progression of its citizens, particularly in high-skilled sectors. This shift is expected to drive innovation, improve productivity, and contribute to sustainable economic growth. However, it also presents challenges, such as ensuring that local talent is adequately prepared to fill roles vacated by expatriates and maintaining Malaysia's appeal as a hub for global talent.
In conclusion, Malaysia's expatriate policy overhaul for 2026 marks a decisive step towards a more locally focused labour market. Through higher salary thresholds, defined employment durations, and an emphasis on succession planning, the government aims to strike a balance between leveraging international expertise and nurturing domestic talent. As the implementation date approaches, stakeholders must collaborate to navigate these changes effectively, ensuring that Malaysia continues to thrive as a dynamic and inclusive economy.
