Malaysia Raises Expat Salary Thresholds as Businesses Warn of Talent Flight

June Visa Changes Put Long Term Plans in Doubt

Malaysia will raise the minimum monthly salaries for expatriate employment passes from June 2026, doubling the thresholds for its two highest categories and introducing sponsorship limits of five or ten years. The changes have left foreign professionals reconsidering property purchases, family arrangements and careers, while businesses warn of higher costs and possible departures.

The highest category will require a monthly salary of 20,000 ringgit ($5,000), up from 10,000 ringgit ($2,500). The middle category will rise from 5,000 ringgit ($1,260) to 10,000 ringgit ($2,520), while the entry professional category will increase from 3,000 ringgit ($760) to 5,000 ringgit ($1,260).

The Ministry of Home Affairs says the policy is intended to support sustainable economic growth and strengthen the development of local talent. Employers will also have to submit plans to recruit Malaysians who can eventually replace expatriates in their roles.

For Sanjeet, a business consultant from India who has lived and worked in Malaysia for more than a decade, the announcement has unsettled a future he once considered secure. Sanjeet, who is in his 40s and asked to use a pseudonym, had become comfortable with the country's climate, people and way of life.

Sanjeet described how his confidence in staying had grown over time:

Once I had crossed the five-year mark, Malaysia seemed like an ideal long-term choice. One gets used to what Malaysia has to offer.

His reaction to the announcement was very different:

What was surprising was that this came out of the blue. It does leave room for doubt in terms of long-term plans, which include things like buying a house or car here.

What Will Change for Employment Passes?

The government announced the tighter requirements in January, extending its efforts to regulate foreign labour to expatriates earning higher salaries. As of March 26, 2026, the changes were due to take effect in June.

The new starting salaries alter who can qualify for each of the three employment pass categories:

• The top category rises from 10,000 ringgit ($2,500) to 20,000 ringgit ($5,000) a month.
• The middle category rises from 5,000 ringgit ($1,260) to 10,000 ringgit ($2,520) a month.
• The entry professional category rises from 3,000 ringgit ($760) to 5,000 ringgit ($1,260) a month.

The first two thresholds increase by 100 percent. The lowest rises by 2,000 ringgit, or about 67 percent. For employers, the practical issue is whether an existing salary still qualifies a worker for the same pass category, or whether a higher salary is needed to keep that category.

Employers will be permitted to sponsor each foreign professional for only five or ten years, depending on the visa category. They must also prepare detailed plans for recruiting local talent to take over expatriate positions. The salary rules therefore sit alongside a requirement to plan for eventual replacement.

Officials say the policy is not intended to restrict expatriate entry. Its stated purpose is to ensure that foreign professionals complement local workers and help develop their skills. The revised salary requirements put Malaysia on par with or above many regional competitors.

The timetable connects an approaching visa change with a much longer workforce strategy:

• In 2024, foreigners accounted for 14.1 percent of Malaysia's workforce, the starting point for the government's reduction target.
• In 2025, the government released the 13th Malaysia Plan, its national policy strategy covering five years.
• In January 2026, the government announced the tighter expatriate requirements.
• In June 2026, the new salary thresholds and sponsorship framework take effect.
• By 2035, the government aims to reduce the foreign share of the workforce to 5 percent.

A Large Foreign Workforce, With Different Roles

Malaysia has attracted foreign labour for decades as it developed into one of Southeast Asia's most advanced economies following independence from Britain in the 1960s. Approximately 2.1 million documented foreign workers now live in the country.

Most work in manual occupations and earn around the monthly minimum wage of 1,700 ringgit ($430). A much smaller group of foreign professionals works in specialised industries, including finance, semiconductors, and oil and gas.

Home Affairs Minister Saifuddin Nasution described the economic weight of that professional group in 2024. He estimated that 140,000 expatriates put about 75 billion ringgit ($19 billion) into the domestic economy each year and contributed approximately 100 million ringgit ($25 million) annually in taxes.

Those figures help explain why businesses are concerned about a policy affecting a relatively small pool of workers. The expatriate population brings spending into the economy as well as expertise into individual companies. Changes to employment eligibility can also affect decisions about living and buying property in Malaysia.

The government's broader concern is the kind of employment the economy creates. Average monthly wages are about $700, and officials want more jobs and higher incomes for Malaysians. Their strategy seeks to reduce dependence on foreign labour while encouraging businesses to invest in local workers and technology.

The debate therefore involves workers with very different salaries and responsibilities. Most documented foreign workers are in manual jobs, while the expatriates affected by the revised employment pass thresholds include managers, engineers and specialists. Employers and economists argue that finding local replacements for specialised positions depends on whether people with the required skills are available.

Why the Government Wants Less Reliance on Foreign Labour

The 13th Malaysia Plan, released in 2025, warned that continued reliance on foreign workers with limited skills had slowed the adoption of critical technology. It connected that reliance with the dominance of jobs requiring fewer skills and paying low wages, distortions in wages, and weak productivity growth.

Productivity means how much a worker or business produces with the time and resources available. The government's argument is that businesses need to improve technology and develop skills so that economic growth can support better paid work.

Malaysia aims to reduce the foreign share of its workforce from 14.1 percent in 2024 to 5 percent by 2035. That is a reduction of 9.1 percentage points, or roughly 65 percent of the starting share. The target gives the employment pass changes a place within a much wider effort to reshape the labour market.

The requirement for employers to plan local replacements is intended to turn foreign expertise into lasting skills among Malaysian workers. Whether companies can do that depends on recruitment, training and the availability of suitable candidates, concerns that run through the business response.

Property Purchases Meet Visa Uncertainty

Thomas Mead, a wealth manager from the United Kingdom, has worked in Malaysia since late 2022. The 28-year-old first fell in love with its culture and food while studying there, then returned to build his career.

Mead recently bought a property in Kuala Lumpur with the intention of putting down roots. He said the government's plans had left some expatriates uncertain about their future, even though they understood that employment rules had always existed.

Mead described the scale of the change:

The jump from 10,000 ringgit to 20,000 ringgit was quite a shock.

Some expatriates have begun discussing where they might relocate if they have to leave, according to Mead. Many would be reluctant to depart. His experience shows how a salary threshold can reach beyond a job contract to affect a major purchase and a decision about where to live.

A French expatriate who has lived in Malaysia for 15 years also expressed strong opposition. Speaking anonymously, the resident described the policy as "ridiculous and unacceptable".

Sanjeet's concerns follow a similar pattern. After more than a decade in the country, the consultant had come to see Malaysia as a place for lasting commitments. The announcement has made him reconsider whether those commitments still make sense.

Companies Face a Different Cost Calculation

Douglas Gan, the Singaporean founder of a venture capital fund with portfolio companies in Malaysia, said the changes would increase expenses for businesses attracted by the country's affordable costs.

Gan highlighted companies recruiting overseas professionals who currently qualify under lower salary thresholds. He gave the example of engineers from second tier cities in China, whose recruitment could become less attractive if employers have to pay more to meet the revised requirements.

Gan stated his concern about a monthly salary of 10,000 ringgit:

If salaries increase to 10,000 ringgit, companies definitely will not bring them here,

Gan said he was not opposed to tighter foreign labour requirements. He wanted the government to consider the effects on different industries instead of applying a blanket approach.

He also described the position of businesses already operating in the country:

For businesses already in Malaysia, we are taking a wait-and-see approach,

His concern centres on the cost of filling particular roles. A company that previously recruited a foreign engineer at a lower qualifying salary must now reconsider its budget, its hiring plans or the availability of a suitable Malaysian candidate.

Can Local Training Keep Pace?

Anthony Dass, chief executive of the strategic advisory firm FSG Advisory, said the policy could raise costs for companies relying on expatriates in the middle employment pass category. He argued that the benefit for Malaysians would depend on how policies to develop the local workforce were carried out.

Dass described the connection between the new requirements and investment in skills:

The measures are directionally consistent with strengthening the local talent pipeline, but complementary reforms in capability building and industry upgrading will determine the outcome.

Wan Suhaimie, head of economic research at Kenanga Investment Bank in Kuala Lumpur, also focused on whether suitable workers were available. Companies can hire Malaysians for specialised roles when candidates have the skills those positions require.

Wan Suhaimie put that concern directly:

The long-run gain depends less on blocking expats and more on whether Malaysia can actually supply the skills,

He said the doubling of salary thresholds had come as a shock. Foreign professionals holding the second category of employment pass, he argued, were core managers, engineers and specialists rather than extravagant hires.

Wan Suhaimie also addressed the requirement to prepare local successors:

Tenure limits can work for skills transfer, but only if succession plans are real and not just paperwork,

A succession plan sets out who can eventually take over a role and how that person will become ready. His concern is whether employers can turn a written commitment into practical training and experience before a foreign employee's sponsorship period ends. The eventual balance between departures and successful local recruitment is not yet known.

An Economist Challenges the Case for Replacement

Professor Geoffrey Williams, an economist, argued that the higher wage thresholds rest on misconceptions about expatriate employment. Malaysia already has a strong pool of highly skilled local professionals, he said, and replacing expatriates is unnecessary.

Williams rejected the idea that expatriates were taking jobs from Malaysians. He set out three reasons:

Firstly, there are too few expatriates to make that claim meaningful. Secondly, it is already costly to pay for visas, so they are not competitive in a cost sense. Thirdly, expatriates are employed for very specific reasons based on experience and expertise. This will not change.

His argument focuses on why employers recruit particular foreign professionals. The cost of visas already adds to hiring expenses, while specialist experience can be the reason a company chooses an expatriate for a role.

Williams also warned that the policy could affect how foreign professionals and investors view Malaysia:

The economic risks of the new Home Ministry rules are that they give a very bad signal that Malaysia is unfriendly to foreigners. This will harm not just employment but also investment,

The disagreement with the government's approach concerns both jobs and business confidence. Officials want expatriate employment to help develop local talent. Williams argues that foreign specialists already serve particular needs and that tighter requirements could make Malaysia less attractive to investors as well as workers.

Family Plans and Support for Malaysian Jobs

Leonardo, an Indonesian working in Malaysia's computer games sector, said the revised salary requirements would move him from the second employment pass category to the third. He had hoped to settle in Malaysia and eventually bring his mother to live with him.

Leonardo explained the family plan now in doubt:

My mum is alone and living in Indonesia. There was a thought that if I could settle here, I could bring her over,

His concern adds another dimension to the salary changes. A different pass category can alter how a worker views the possibility of building a lasting home, even while remaining employed in the country.

Joshua Webley, a business manager from the United Kingdom, takes a more supportive view of the policy. The 33-year-old, who is married to a Malaysian citizen, said he was fully on board with giving priority to Malaysian jobs.

Webley argued that Malaysia would continue to attract foreign workers with the right abilities:

If you come here to Malaysia, you have to be skilled enough. For those highly skilled workers, Malaysia will still be a shining light for relocation,

Sanjeet, meanwhile, is considering alternatives if the government proceeds without what he regards as a comprehensive rationale. He named other destinations in the region:

If Malaysia pursues these policies without a comprehensive rationale, then people like me will look for alternatives such as Vietnam, Thailand and elsewhere, which have favourable policies for expats,

The choices facing these residents differ, from supporting the priority given to Malaysian jobs to reconsidering a move elsewhere. All are responding to a policy that ties salary eligibility more closely to a time limit and an expectation that a local worker will eventually take over.

Key Points

• Malaysia's revised expatriate employment pass requirements take effect in June 2026.
• Minimum monthly salaries rise to 20,000 ringgit for the top category, 10,000 ringgit for the middle category and 5,000 ringgit for the entry professional category.
• Employers face sponsorship limits of five or ten years, depending on category, and must plan to recruit local replacements.
• Home Affairs Minister Saifuddin Nasution estimated in 2024 that 140,000 expatriates contributed 75 billion ringgit annually to the economy and about 100 million ringgit in taxes.
• The government aims to reduce foreigners from 14.1 percent of the workforce in 2024 to 5 percent by 2035.
• Business leaders and economists warn of higher costs, shortages of specialist skills and damage to investment confidence.
• Foreign residents are reconsidering property, family and relocation plans, while some support the priority given to Malaysian employment.