Guide to Limited and Unlimited Contracts in UAE Labor Law

The first thing to inquire about when an employer or employee brings up legal concerns regarding their working relationship is whether they have a limited or unlimited labor contract. Here, we attempt to clarify the pertinent clauses of the limited and unlimited contracts under UAE labor law with regard to resignation and termination of employment. Firstly, we will throw light upon the changes that have been made under the new labor law that should be considered by both the original employers and third-party employers providing HR services in UAE. Then, we will consider general concepts and differences between limited and unlimited contracts in the UAE.

What’s New in UAE Employment Contracts According to the Latest Labor Law?

Employees had the choice to work under unlimited or fixed-term contracts as per their previous position. However, the new labor position suggests that all employees must be hired on a fixed-term employment contract. As a result, those on permanent or indefinite contracts will be substituted for temporary, renewable agreements with specified terms for up to three years.

Probationary periods are limited to a total of six months, and they can be ended with two weeks’ notice while they are still in effect. A month’s notice is required if an employee expects to shift jobs during their probationary period, or 14 days if they wish to flee the country. These regulations apply to outsourced employers also. Thus those businesses who hold the responsibility of HR services in UAE should keep their eyes open.

Moreover, employers cannot force workers to quit the country after they quit their job or their employment is terminated. Instead, the former employee will be allowed up to 180 days to discover a job without overstaying their visa. Under the previous law, someone who had their residency visa canceled had just 30 days to find new work or leave the country without incurring fines for overstaying, making this one of the most substantial changes.

Read More : Outsourcing HR Functions: What You Should Know.

What You Need to Know About Limited Term Contracts in the UAE?

A limited contract, as its name suggests, is a sort of employment agreement that is valid for a set length of time that is not more than three (3) years. Unless extended by the employer, it begins and ends on the dates mentioned as per the new labor law for limited contracts in UAE.

A contract may be terminated by either the employer or the employee if both parties agree to do so and as long as the notice period specified in the contract is given (not exceeding three months).

In the following situations, the employer may terminate an employee with a limited contract without providing any notice:

  • If an employee falsified identification or paperwork.
  • If an employee causes the employer to suffer any kind of significant financial loss.
  • If the worker is discovered to be drunk or using drugs.

What You Need to Know About Unlimited-Term Contracts in the UAE?

As we already discussed, unlimited term contracts have been changed to fixed term contracts. Previously there was no limit to an unlimited term contract and it could last for as many years as wanted. However, the new labor regulations in the UAE has introduced some limits to the unlimited term contract i.e., the 2 years contract limited has added to these type of contracts.

According to UAE Labor Law, an unlimited term contract is open-ended and liable to cessation for a variety of rationales. An employee may resign by allotting the employer the agreed-upon amount of notice. In comparison to limited duration contracts, unlimited contracts are commonly seen as being more adaptable and user-friendly. Due to this, unlimited term contracts rather than restricted term contracts are more frequently adopted in the UAE. Employees who are not working on endeavors and are aspired to be permanent may use it.

Limited & Unlimited Contracts in UAE Difference

As the names suggest, limited and unlimited contracts in UAE differ in the length of time that they are in effect. A limited contract is typically valid for two years, after which it will need to be renewed if the employer wishes to keep the employee on. An unlimited contract, on the other hand, does not have a set expiry date and will continue until either the employer or the employee decides to terminate it.

There are pros and cons to both types of contracts. Limited contracts offer more job security to employees as they cannot be terminated without cause, but they also tend to be less flexible in terms of hours and working conditions. Unlimited contracts, while they do not offer the same job security, can be more advantageous for employees as they often come with more favorable terms. While making a contract the employee should know how to check limited and unlimited contracts in UAE and assure what type of contract he is making.

Choose the Best HR Outsourcing Services

Consult Payroll Middle East for complete guidance about the labor regulation in the UAE. We can also provide employment visa sponsorship and other HR services in UAE to companies that want to attract talent from outside the UAE.

Read More : HR Outsourcing Services for Small Business in UAE.