MIDA's New EP Rules Set RM20,000 Floor for Foreign Hires

The Malaysian Investment Development Authority (MIDA) has rolled out the country's most significant tightening of the expatriate Employment Pass (EP) framework in over a decade, doubling minimum salary floors across all three categories and capping the maximum stay for foreign hires. The revised policy, which took effect on 1 June 2026, also introduces mandatory local succession plans and channels all Manufacturing and Selected Services applications through the new MIDA Expatriate System (MES) (MIDA Malaysia). For Malaysian startups scaling up technical and product teams, the rules reset both the cost and the timeline of every foreign hire.

The deal

The headline number is the new Category I floor: a basic monthly salary of RM20,000 or above, up from RM10,000, for executive and highly specialised positions, with the pass now valid for up to 10 years. Category II, covering managers and mid-level specialists, moves from RM5,000–RM9,999 to RM10,000–RM19,999, and Category III, the entry tier for technical and junior positions, from RM3,000–RM4,999 to RM5,000–RM9,999, with a separate RM7,000 floor for Manufacturing and Manufacturing-Related Services. Only base salary counts — allowances, bonuses and housing are excluded. The framework also imposes hard cumulative tenure caps of up to 10 years for Categories I and II and 5 years for Category III, replacing the previous possibility of indefinite renewals. Sponsors of Category II and III hires must submit a formal Local Succession Plan documenting how technical skills will transfer to Malaysian employees, and Category III holders are now eligible for Dependant Passes for the first time.

Layered on top of the EP overhaul, the salary threshold for exemption from Labour Market Testing (LMT) on the MyFutureJobs portal was lifted from RM15,000 to RM20,000 on 7 August 2026. Expatriate roles paying between RM15,000 and RM19,999 a month must now be advertised on the government portal for at least 14 working days, and local candidates interviewed, before an EP application can be filed. Senior management, intra-company transfers, EP renewals, RERO posts, investors, shareholders, and international-organisation and sports-sector positions remain exempt. All Manufacturing and Selected Services EP, Professional Visit Pass (PVP), and Dependant Pass applications now flow through MES, the centralised platform accessed via single sign-on through the Xpats Gateway.

Why this matters

For early-stage founders, the reform turns the EP from a flexible backstop into a hard budget line. A regional product lead or senior engineer hired in 2025 on a Category II package of RM9,000 now sits in a different bracket: the same role re-papered in 2026 needs to clear RM10,000, and any re-application at the next renewal cycle will be tested against the new floor. For a 30-person company hiring one overseas specialist, the cost of the offer is no longer the only variable — the timeline now also includes the LMT advertising window, the succession-plan paperwork, and the MES filing.

The policy is part of a broader local-first push by the Ministry of Home Affairs. The revised framework requires all employers to advertise expat-bound vacancies on MyFutureJobs before applying, and to obtain SOCSO (PERKESO) certification in cases where a suitably qualified Malaysian candidate may be available. Exemptions now sit at RM20,000-and-above roles, a sharp jump from the old RM15,000 line, and the categories of roles that retain exemptions — renewals, intra-company transfers, C-suite hires — reflect an intent to keep Malaysia open to senior, capital-bringing, or globally mobile talent while raising the bar on volume hiring of mid-tier foreign staff.

The investor read is structural. Foreign-led startups pitching to Malaysian VCs — or Malaysian startups pitching to overseas funds who intend to relocate a regional hire to KL — now need to model an EP-eligible offer into the early cap table. Some founders will route regional hires through Singapore or Bangkok instead. Others will compress roles into a Category I or II band, accept the higher cash burn, and budget the LMT process as a known lead-time line. The end state MIDA is steering toward is a smaller, more expensive foreign workforce in Malaysian tech, with explicit handoff to local hires inside a five-to-ten-year horizon.

What's next

The mandatory succession-plan requirement for Categories II and III was originally scheduled to take effect on 1 June 2026 but, per MYXpats updates, will now commence on 1 January 2027, giving employers a six-month runway to formalise their plans. A specialised one-year grace period applies to native-language professionals in the Global Business Services (GBS) sector, who keep the old Category III thresholds until 1 June 2027. Companies with existing applications on legacy systems should expect those to wind down as MES takes over end-to-end processing; the next MES release window is the clearest near-term signal to watch.

Source: MIDA Malaysia