The Ministry of Home Affairs (MOHA) has recently implemented a revised expatriate employment policy effective 1 June 2026, introducing higher salary thresholds and revised employment pass conditions for expatriates employed in Malaysia.
Following the announcement, the Labuan Financial Services Authority (Labuan FSA) has issued clarification confirming the applicability of the revised policy to entities operating within the Labuan International Business and Financial Centre (Labuan IBFC).
What Does This Mean for Labuan Companies?
The most important clarification from Labuan FSA is that the existing RM10,000 minimum salary threshold for expatriates employed by Labuan entities remains unchanged and continues to qualify for Employment Pass approval.
In practical terms, under the revised framework governed by MOHA, the requirements are as follows:
(i) the salary for Employment Pass Category I expatriates is increased from RM10,000 and above to RM20,000 and above;
(ii) the salary for Employment Pass Category II expatriates is increased from RM5,000 to RM9,999 to RM10,000 to RM19,999;
(iii) the salary for Employment Pass Category III expatriates is increased from RM3,000 to RM4,999 to RM5,000 to RM9,999, except for the manufacturing sector and manufacturing-related services (MRS), which is set at RM7,000 to RM9,999;
(iv) the employment period for Employment Pass Category I is set at 10 years;
(v) the employment period for Employment Pass Category II is set at 10 years with a replacement plan;
(vi) the employment period for Employment Pass Category III is set at 5 years with a replacement plan; and
(vii) all expatriates holding Employment Pass Categories I, II and III are allowed to bring dependants.
Key Changes Under the Revised Employment Pass Framework
EP Category | Current Minimum Salary | Revised Minimum Salary (Effective 1 June 2026) | Employment Pass Duration |
Category I | RM10,000 and above | RM20,000 and above | Up to 10 years |
Category II | RM5,000 – RM9,999 | RM10,000 – RM19,999 | Up to 10 years (with succession plan) |
Category III | RM3,000 – RM4,999 | RM5,000 – RM9,999 | Up to 5 years (with succession plan) |
What is a Succession Plan?
Under the revised Employment Pass framework, expatriates holding Employment Pass Category II and Category III are subject to a replacement (or succession) plan requirement.
As part of a phased implementation approach, the requirement to submit and comply with the succession plan will only take effect from 1 January 2027 onwards. This transition period is provided to allow organisations sufficient time to prepare, plan, and align their internal workforce strategies with the new requirement.
In general, a replacement plan means that the employer should demonstrate efforts to transfer knowledge, skills and responsibilities from the expatriate employee to suitable Malaysian personnel over time. The objective is to encourage the development of local talent and reduce long-term dependence on expatriate workers for positions that can eventually be localised.
For example, a company employing a foreign Chief Executive Officer (CEO) or General Manager may identify and train a Malaysian employee to gradually assume greater responsibilities, with the aim of being capable of taking over the role in the future.
Further clarification may be required regarding the application of these requirements to Labuan entities and certain categories of expatriates, including founders, shareholders, directors and key management personnel.
Sources from MIDA: https://www.mida.gov.my/media-release/announcement-phased-implementation-of-succession-plan-requirement-under-the-revised-expatriate-salary-policy/
How Silverknows Can Assist
The revised Employment Pass framework introduces new salary bands, tenure limits and replacement plan requirements, which may affect different businesses in different ways.
As part of our work permit advisory services, Silverknows will assess each client’s specific circumstances, including the proposed role, salary package, ownership structure, business activities and long-term operational requirements, before advising on the most appropriate Employment Pass category and work permit strategy.
Particular consideration may be required where the expatriate is a founder, shareholder, director, chief executive officer or other key management personnel, as different regulatory considerations may apply.
Silverknows Trust Ltd assists both licensed and non-licensed Labuan entities with:
- Labuan company incorporation
- Work permit and Employment Pass applications
- Labuan financial license applications
- Corporate secretarial and compliance services
- Office and economic substance solutions
For enquiries on Labuan work permits or establishing a Labuan entity, please contact our team for further assistance.