The framework in brief
Begin with three practical questions: what will the hire cost, which steps must be completed before work starts, and which employment requirements apply? Answer them for the proposed role and employing entity before issuing an offer. A local hire, an expatriate specialist and a flexible working arrangement can have different dependencies.
Since 1 January 2023, the Employment Act 1955 generally covers private-sector employees under contracts of service in Peninsular Malaysia and Labuan regardless of salary. Employees whose statutory monthly wages exceed RM4,000, unless within specified protected occupational categories, are excluded from certain premium-pay and termination or lay-off entitlements. This threshold does not remove the Act’s broader protections. Sabah and Sarawak have separate Labour Ordinances, so employment counsel should check the requirements for the work location.
The national minimum wage is RM1,700 in monthly basic wages for covered employees, including noncitizens and apprentices; domestic employees are excluded. The 2025 implementation was phased, with the remaining covered employers brought in from 1 August 2025. Basic wage, statutory wages and the total remuneration package are different concepts and should not be used interchangeably.
Payroll schemes have distinct eligibility rules. EPF contributions became mandatory for covered non-Malaysian employees from October 2025 wages; permanent residents and certain earlier members retain different contribution treatment. SOCSO also covers foreign workers and expatriates, with applicable coverage and contribution categories. Ordinary foreign expatriates are generally outside EIS coverage, while eligible Malaysian citizens and qualifying resident categories may be covered. Use current EPF and PERKESO schedules for the employee’s citizenship, residence, age and employment status rather than one universal payroll percentage.
What a hire actually costs
Salary alone does not represent the full employer cost. Budget for applicable employer contributions, insurance, benefits, recruitment, payroll administration, equipment and training. Expatriate hires may also require pass fees, relocation and other agreed support. The share attributable to salary varies by role and employment arrangement; there is no reliable universal three-quarter rule.
Compare local and expatriate staffing against the capabilities the operation needs, using like-for-like cost assumptions. Flexible and part-time roles also need appropriate contracts and payroll treatment. Contributions and employment obligations depend on the applicable scheme and actual arrangement, not simply the label chosen for the role. Employment counsel and a payroll provider should check the design before the offer is finalised.
How long onboarding actually takes
For a local hire, company readiness and the candidate’s notice period often determine the timetable. Employer registrations, payroll accounts, a compliant contract and the working arrangements should be ready before the start date. Include these tasks in the setup plan described in our post-incorporation briefing rather than assuming a standard onboarding period.
For an expatriate hire, confirm the employing entity’s eligibility, the relevant approving or regulatory agency and the Employment Pass pathway before promising a start date. A signed offer does not authorise work. Budget for preparation, agency support where applicable, Immigration approval and mobilisation; processing depends on the case and should not be presented as a guaranteed number of weeks.
Employment Pass policy from 1 June 2026
New and renewal Employment Pass applications submitted on or after 1 June 2026 are subject to the revised salary policy. The thresholds concern monthly basic salary, excluding allowances and other payments.
| Category | Monthly basic salary | Employment duration framework |
|---|---|---|
| I | RM20,000 and above | Up to 10 years |
| II | RM10,000–RM19,999 | Up to 10 years |
| III | RM5,000–RM9,999 | Up to 5 years |
Manufacturing and manufacturing-related services exception. Category III has a basic-salary band of RM7,000–RM9,999 for the qualifying manufacturing and manufacturing-related services companies identified in the official FAQ. Manufacturing companies must hold a Manufacturing Licence or Manufacturing Exemption Confirmation Letter; the specified services companies are selected MIDA sectors with approved incentives, status or grants. Check which company category applies rather than assuming every manufacturing-related role uses the general RM5,000 minimum.
The ten-year and five-year limits describe the employment duration framework, not a promise of one pass valid for that entire period. The official FAQ permits applications for employment periods of up to 60 months, subject to approval. It also explains how duration is counted by employing company and how changes of employer or pass category are treated. Valid existing passes do not require a fresh application solely because the policy changed, but renewals submitted under the new policy must meet its requirements.
Succession planning is phased. The policy introduces succession plans for Categories II and III to support transfer of knowledge and responsibility to local employees. Immigration’s update dated 26 May 2026 deferred this requirement to 1 January 2027. Employers should prepare the relevant local talent plan and check the implementation guidance applicable when they submit; it should not be described as already mandatory from June 2026.
Advertising and the RM15,000 exemption
PERKESO’s MYFutureJobs FAQ Bil. 1/2026 retains an automatic job-advertising exemption for expatriate posts with monthly basic salary of RM15,000 or more. This is a separate labour-market advertising rule. It is not the threshold for Category I, which now starts at RM20,000, and it does not waive Employment Pass eligibility, agency support or Immigration approval.
Where no exemption applies, the FAQ requires advertising for at least seven days and interviews of eligible local candidates as part of the process. Its Peninsular Malaysia and Federal Territories procedures should not be assumed to resolve Sabah or Sarawak requirements; check the relevant Labour and Immigration authorities for those states. Confirm the applicable route and evidence with the responsible agencies and immigration specialists before relying on an exemption.
What you cannot do
Contracts must respect the statutory requirements that apply to the employee and work location. Do not treat compulsory contributions as optional, promise work before the appropriate permission is in place, or assume a salary above RM4,000 removes all Employment Act protections. Particular entitlements, payroll schemes and pass conditions need separate checks.
Dismissal and restructuring can create legal exposure beyond a contractual notice clause. Obtain employment counsel’s advice on grounds, documentation, process and any applicable benefits before acting. For Sabah and Sarawak, use advice based on the respective ordinances and local procedures rather than importing a Peninsular Malaysia template.
The workforce question behind the compliance question
The compliance plan should support the team the business needs. Malaysia offers multilingual talent across engineering, finance, shared services and digital activities, but capability, availability and compensation must be tested for the particular role. Language and local commercial understanding can matter as much as headline salary.
Location shapes the recruiting pool: the Klang Valley and Penang have different concentrations of professional and technical talent. Build the staffing model around actual local capabilities, adding expatriate expertise where the role and approval pathway support it. Avoid assuming that a national workforce description settles availability at an individual site.
What this means for your decision
Price the whole employment arrangement, prepare employer and payroll registrations, and confirm the contract and work-location requirements. For expatriates, check the June 2026 basic-salary bands, any manufacturing exception, duration framework and the separate advertising requirements. Plan for the succession requirement scheduled for January 2027.
TAPiO can help develop the commercial staffing plan, cost model and implementation sequence. Employment counsel, payroll providers and immigration or employment-pass specialists should confirm the legal requirements, contribution treatment and application pathway for the case.
Official sources and update
Updated on 10 October 2026, retaining the original release date. The policy dates and distinctions in this update were checked against these official sources.
- Immigration: revised Employment Pass salary policy, 15 January 2026
- Official revised expatriate salary policy FAQ, updated 12 February 2026
- Immigration: succession-plan implementation deferred, 26 May 2026
- PERKESO: MYFutureJobs advertising and exemption FAQ Bil. 1/2026
- JTKSM: Employment Act amendment FAQ and specified RM4,000 entitlement exceptions
- EPF: non-Malaysian employee contributions
- PERKESO: foreign-worker and expatriate coverage and Employment Insurance System Act 2017
- KESUMA: minimum wage implementation statement, 22 July 2025
About TAPiO Management Advisory
TAPiO Management Advisory is an international advisory firm headquartered in Kuala Lumpur, supporting companies, government agencies and institutions with market entry, investment facilitation and strategic projects across Malaysia and ASEAN.
Questions and answers
The practical questions, answered.
What are the Employment Pass salary thresholds from 1 June 2026?
Monthly basic salary must be RM20,000 or more for Category I, RM10,000–RM19,999 for Category II, and RM5,000–RM9,999 for Category III. Qualifying manufacturing and manufacturing-related services companies use RM7,000–RM9,999 for Category III. Allowances are excluded.
When does the Employment Pass succession-plan requirement take effect?
The requirement associated with Categories II and III was deferred to 1 January 2027 by Immigration’s update dated 26 May 2026. The revised salary policy still took effect from 1 June 2026.
Does the RM15,000 job-advertising exemption still apply?
PERKESO’s MYFutureJobs FAQ Bil. 1/2026 retains an automatic advertising exemption at monthly basic salary of RM15,000 or more. This does not waive Employment Pass requirements or agency and Immigration approvals, and it is separate from the Category I salary threshold.
Does the Employment Act cease to protect employees above RM4,000?
No. The Act generally covers private-sector employees under contracts of service in Peninsular Malaysia and Labuan regardless of salary. Some premium-pay and termination or lay-off entitlements have exceptions above RM4,000 in statutory monthly wages, subject to protected occupational categories.
Is salary a fixed proportion of the total employment cost?
No. Salary alone does not represent the full employer cost. Applicable contributions, benefits, recruitment, administration and any expatriate support vary by role and arrangement. Use a specific cost model and current payroll eligibility rules.
