VIVOS Malaysia · Insights · 2027 Rule Changes, Episode 4
Setting up a new company in Malaysia?
If you are a foreign founder planning a new Sdn Bhd, build rules like this into the set-up plan from the start. Fixing them after incorporation usually takes longer than getting them right on day one.
Most of our Malaysia clients need two things together: a new Sdn Bhd and an Employment Pass so they can live in Malaysia and run it. VIVOS handles both. See company incorporation in Malaysia and Malaysia work visas and immigration, or read Can you get a Malaysia Employment Pass through your own company.
Malaysia Employment Pass Succession Plan: What a Sdn. Bhd. Employing Expats Should Do Now
From 1 January 2027, a Malaysian Sdn. Bhd. applying for a Category II or III Employment Pass must include a succession plan. No official template exists yet; the ESD FAQ lists what it should cover: roles to localise, training and knowledge transfer, a timeline and continuity planning. Renewals must also meet the 1 June 2026 salary floors.
What most pages still say: “Category III needs RM3,000, and renewals carry on as before.”
What’s true since 1 June 2026: Category III starts at RM5,000, and a renewal submitted on or after that date must meet the new floor (ESD FAQ).
The episode video first aired on 28 October 2026. For the full, regularly updated guide, see Malaysia Employment Pass salary thresholds 2026.
Key facts for Malaysian employers (as of October 2026)
- Succession plan required for Category II and III applications from 1 January 2027 (MIDA).
- Renewals submitted on or after 1 June 2026 must meet the new floors; valid passes need not reapply (ESD FAQ).
- Only basic monthly salary taxable in Malaysia counts (ESD booklet).
- Maximum with one employer: 10 years (I, II) or 5 years (III).
| Category (basic monthly salary) | Succession plan from 1 January 2027 | Do now |
|---|---|---|
| I (RM20,000 and above) | Not required | Check the basic salary line |
| II (RM10,000 to RM19,999) | Required | Draft the plan |
| III (RM5,000 to RM9,999; RM7,000 to RM9,999 in specific manufacturing) | Required | Draft the plan; raise basic pay below the floor before renewal |
The video explainer: Malaysia Employment Pass 2027: New Salary Floors and the Succession Plan.
Who in your company needs a succession plan?
Every expatriate whose application falls in Category II or III from 1 January 2027, under MIDA’s phased implementation. Category I is outside the requirement as announced. Start with the passes that renew first.
What should the plan cover?
When we checked on 12 October 2026, there was no official template. The ESD FAQ lists four elements: the roles to be localised, training and knowledge transfer, a timeline, and continuity planning. Name the local staff who will learn the role, what they will learn and by when.
What happens at renewal?
The new floor applies. The FAQ’s example is a Category III holder on RM3,500, whose basic salary must rise to at least RM5,000, or RM7,000 in specific manufacturing roles. A higher allowance or a bonus does not close the gap. Budget the increase before the renewal is submitted.
Does pay from the Singapore parent count?
No. The ESD booklet excludes salary paid outside Malaysia, so the Sdn. Bhd. still pays at least the floor as basic salary in Malaysia. Separately, a Category III employee applying from 1 June 2026 may bring dependants; passes issued before may not.
What should a Sdn. Bhd. do this quarter?
- List each expatriate’s category, basic salary, position and expiry date.
- Draft a succession plan for each Category II and III role, under the four FAQ headings.
- Raise any Category III basic salary below RM5,000 before renewal.
- Note time served against the 10-year and 5-year maximums.
Frequently asked questions
Which of our expatriate employees need a succession plan?
Those in Category II (basic salary RM10,000 to RM19,999) and Category III (RM5,000 to RM9,999, or RM7,000 to RM9,999 in specific manufacturing and manufacturing-related services). From 1 January 2027, applications in both categories must include a succession plan. The requirement as MIDA announced it does not cover Category I, where the basic salary is RM20,000 or more.
What should a Malaysia Employment Pass succession plan include?
There is no official template yet: neither MIDA nor the Expatriate Services Division had published one when we checked on 12 October 2026. The ESD FAQ lists what the plan should cover: the roles to be localised, training and knowledge transfer to local staff, a timeline, and continuity planning. Keep it specific to the role and the person.
Our Category III employee earns less than RM5,000. What happens at renewal?
A renewal submitted on or after 1 June 2026 must meet the new floor. The ESD FAQ’s own example is a Category III holder on RM3,500, whose basic salary must rise to at least RM5,000, or RM7,000 in specific manufacturing roles. Only basic salary counts, so raising allowances or adding a bonus does not close the gap.
Does salary paid by our Singapore parent company count towards the floor?
No. The Expatriate Services Division counts only the basic monthly salary taxable in Malaysia, and excludes salary paid outside Malaysia, as well as allowances, incentives and bonuses. So if a Singapore company in the group pays part of the package, the Malaysian Sdn. Bhd. still has to pay at least the category floor as basic salary in Malaysia.
Sources
- MIDA: Implementation of New Expatriate Employment Policy; Phased Implementation of Succession Plan Requirement.
- Immigration Department of Malaysia, Expatriate Services Division: Revised Expatriate Salary Policy and FAQ. All checked 12 October 2026.
Read the full guide to the Malaysia Employment Pass in 2027, with the Singapore comparison, and the 2026-2027 Rule Changes Tracker. Next episode: coming soon. Also see the Malaysian subsidiary of a Singapore company, or talk to our team.
Reviewed by Ray Tay, VIVOS. VIVOS (M) Sdn. Bhd., Registration No. 202501057568 (1658974-A), Kuala Lumpur, part of VIVOS Group with VIVOS Pte. Ltd. (Singapore, UEN 202416468C, MOM EA Licence 24S2425). Facts checked 12 October 2026. General information, not immigration or tax advice.
Video transcript
Read the full transcript of the VIVOS video “Malaysia Employment Pass 2027: New Salary Floors and the Succession Plan”
What does a Malaysia Employment Pass need now? Category One: a basic salary of twenty thousand ringgit a month. Category Two: ten thousand. Category Three: five thousand. From the first of January 2027, Two and Three also need a succession plan. I'm Ray Tay, co-founder of Vivos. Many pages still show the old floors, ten thousand for Category One and three thousand for Category Three. Those changed on the first of June 2026.
Two details catch people out. Only basic salary counts, not allowances or bonuses. And there are now time limits with the same employer: ten years for Categories One and Two, five for Category Three. Renewals are caught too. Renew after the first of June, and the new floor applies: three thousand five hundred ringgit must rise to five thousand. Good news: new Category Three passes can bring family.
Hiring in Singapore? There, the first of January 2027 lifts the Employment Pass minimum for new applications to six thousand dollars. Same day, two different tests. So write the succession plan before the renewal, not after. Vivos runs both sides, with Vivos in Singapore and Vivos Malaysia in Kuala Lumpur. Most firms compare countries. Vivos connects them.
