What is the 2026 ESD Update?
The requirements for hiring foreign talent in Malaysia are set to change in 2026. The Ministry of Home Affairs (MOHA), through the Expatriate Services Division (ESD), has introduced updated salary requirements for all Employment Pass (EP) categories.
Under the previous requirements, businesses could hire foreign professionals at lower salary levels. Under the new policy, the minimum monthly salary requirements for Employment Pass Categories I, II, and III will increase, and new limits will apply to the duration of these passes.
These changes support the goals of the Thirteenth Malaysia Plan (RMK-13), which aims to strengthen the local workforce and create more opportunities for Malaysian talent. For employers that rely on foreign professionals, understanding the new salary requirements and Employment Pass rules will be important when planning future hiring and workforce needs.
Understanding the Shift to the 2026 Employment Pass Categories
It is important to understand the timing of this ESD update, as applications submitted after the cut-off date will need to meet the updated salary requirements.
Because this change also applies to renewals, human resource professionals and legal advisors should review existing employment agreements to ensure compliance and avoid delays or issues during processing.
Comparison of Employment Pass (EP) Categories
This comparison provides an overview of changes across EP categories, including how foreign employees will be classified and the maximum duration of their passes.
Category I, the highest Employment Pass tier, now has its minimum salary increased from RM10,000 to RM20,000 per month.
Categories II and III also have higher salary requirements, along with a requirement for employers to submit a local succession plan outlining how Malaysian employees will be trained and developed to fill these roles over time.
Why Understanding the ESD Update Matters
Staying updated with these regulatory changes is important for managing compliance, budgeting, and international hiring effectively.
Taking early steps to align with the updated requirements can help organisations:
- Identify payroll budgets: Accurately forecast costs for expatriate employees.
- Prevent delays and refusals: Ensure employment contract terms meet the updated salary requirements before submission to the ESD portal.
- Maintain operational continuity: Manage the renewal of existing Employment Pass holders in compliance with the updated rules.
- Design compliant training frameworks: Develop and document local succession plans to meet the requirements for Categories II and III.
Some organisations may still base their international hiring offers on previous salary levels. Updating recruitment and compensation planning early can help ensure a smoother compliance process going forward.
Common Challenges and Best Practices
One common issue companies may face during this regulatory change is assuming that existing expatriate contracts will continue under previous requirements. In practice, renewal applications submitted after the effective date will be subject to the updated salary requirements.
To reduce compliance issues, businesses may consider the following steps:
- Conduct an internal audit: Review current expatriate salary structures against the updated June 2026 requirements.
- Develop succession plans: Work with relevant departments to establish training and transition plans for local employees.
- Engage compliance support early: Seek guidance from legal or compliance advisors before submitting applications.
- Monitor regulatory updates: Stay informed of any additional guidelines or clarifications issued by the authorities.
Taking a proactive approach to these changes can help businesses manage compliance requirements more effectively during the transition period.
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2026 ESD Updates in Malaysia: What Employers Need to Know About Hiring Foreign Talent