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The UAE has become a popular destination for expats because of its promising career opportunities, strong economy, and tax-free business environment. The country hosts the highest number of emigrants with 89% of its population being foreign nationals.
However, one must have a valid employment contract, as required by the UAE Labor Law to avail the benefits of living and working in the UAE.
In this blog, we will come to know what an employment contract is and its types i.e., limited unlimited contract UAE. Keep reading to have a comprehensive guide on limited unlimited contract UAE.
If you need advice regarding limited unlimited contract UAE? Contact us @ Archtech.
An employment contract is a legally binding agreement between an employee and an employer that clearly states the terms and conditions of employment in the UAE.
Every company or organization runs with this employment contract in UAE. The details in the employment contract may vary depending on the nature of the job as well as the industry, but some of the terms that are common in the employment contract include:
If you need advice regarding limited unlimited contract UAE? Contact us @ Archtech.
There are two types of employment contracts i.e., Limited Contract and Unlimited Contract.
These contracts are mainly differentiated based on entitlements and lawful rights. Below are the details of both contracts:
A limited contract in the UAE is a fixed-term contract with a defined start and end date. This contract is often linked to the period of the concerned person’s UAE residency visa, hence, the maximum duration is 4 years.
In a limited-term contract, both parties (employer as well as employee) agree upon a fixed employment period, which automatically gets canceled once the contract-defined period is over.
Upon its ending, the employer has the choice either to renew or terminate the contract based on mutual agreement between the employer and the employee.
The key features of Limited Contract UAE include:
Defined start and end dates are mentioned in the employment contract. However, a fixed-term duration cannot exceed 4 years.
The salary of the employee is fixed for the period of the contract and cannot be changed unless both parties mutually agree upon it. The amount of salary along with the benefits are also clearly written before the signing of the agreement.
The contract automatically gets terminated once its duration is over. However, the contract can also be terminated before its end date if there is a valid reason. Furthermore, both parties must give a notice period as mentioned in the contract.
Limited contracts are usually accompanied by benefits such as annual leave, health insurance, and end-of-service gratuity.
Also, the workplace and nature of work cannot be changed without the consent of both parties.
This type of contract is limited to a specific employer which means an employee cannot switch companies until the contract term ends or with mutual agreement between both parties.
The limited employment contract is typically suitable when employers need to engage employees for a specific task or when the duration of the project is known in advance.
Once the contract duration is over, it automatically gets canceled unless renewed by mutual agreement of both parties.
The renewal can be for a similar duration or with a mutually agreed-upon period. However, if the employer does not want to renew the contract, they must give a notice period as per UAE Labor Law.
Both parties are entitled to compensation if an event of termination or resignation from a limited contract happens.
Limited-term contracts are commonly used in the UAE for temporary, seasonal, or project-based roles.
For example, a manufacturing company may hire extra staff on limited contracts during the peak production period to meet increased demand and then let them go once the season ends.
The chief implication of this type of contract is job security. That is, if the employer chooses not to renew the contract after its expiry, the employee may have to find a new job.
Also, if the employee decides to end the contract before its expiry, they are subjected to penalties and may also lose their end-of-service gratuity.
If you need advice regarding limited unlimited contract UAE? Contact us @ Archtech.
An unlimited employment contract is open-ended in nature, which means it has a defined start date but no fixed end date. This open-ended type makes the contract more flexible for both the employee and employer.
In such type of contract, the terms and conditions will remain in force until one or both parties decide to end the contract or if both parties sign an addendum.
The key features of an unlimited contract UAE include:
Unlimited-term contract in UAE is flexible as it has no any specified end date. The terms and conditions continue until the contract is ended by one or both parties.
The unlimited contract usually comes with benefits such as great job security, overtime pay, annual leave entitlement, sick leave, and end-of-service benefits, such as gratuity pay.
In this type of contract, the employee has the choice to change jobs without having to wait for the contract termination.
As the residence visa of the employee is not tied to the contract, so contract can be ended at any time but with proper notice and mutual agreement with the current employer.
The employer also has the right to change the terms of employment, including salary and benefits, after discussing it with the employee. However, these changes must be done obeying the UAE Labor Law.
This type of contract is suitable for those employees who seek a more fluid and flexible work arrangement.
As there is no fixed duration in an unlimited-term contract, therefore, automatic renewal of the contract doesn’t happen. However, if both parties wish to continue the contract, they can sign an addendum with new terms and conditions.
In an unlimited contract, if either party wishes to end the employment contract without any valid reason or notice period, they must provide compensation equal to 30 days’ worth of salary.
This rule must be applicable even if the termination is based on mutual agreement and a 30-day notice period is given in advance.
Unlimited contracts are usually used for permanent positions or long-term roles, as they offer more flexibility, job security, and career growth opportunities for employees.
They are also advantageous for employers who want to retain skilled and talented workers without the risk of losing them due to limited contract restrictions.
The highest benefit of an unlimited contract is job security. In such a type of contract, employees have a certain level of protection against being dismissed without justification.
Also, the employee can continue working as long as they fulfill their contractual obligations and the employer is satisfied with their performance.
If you need advice regarding limited unlimited contract UAE? Contact us @ Archtech.
The key differences between limited unlimited contract UAE could be inferred when compared in terms of the duration of the contract, termination, compensation, and end-of-service gratuity.
The UAE Labor Law provides various rules and regulations on employment relationships which are must to follow. The blog highlights the differences between limited unlimited contract UAE giving a general overview of their contractual implications to the readers.
Each type of employment contract has particular advantages and disadvantages that influence how jobs are filled in the ever-changing business climate of the United Arab Emirates.
If you need advice regarding limited unlimited contract UAE? Contact us @ Archtech.
Yes, the limited contract can be converted into an unlimited one or vice versa. However, conversion can be done by mutual agreement of both parties, following the necessary procedures outlined in the UAE Labor Law.
Limited contracts differ in a way that they have a fixed duration and specific notice periods, while unlimited contracts are open-ended with no fixed duration.
Yes, employees can end a limited contract before its expiry date; however, they may be subjected to penalties and may lose their end-of-service gratuity. The employer can also terminate a limited contract before its end date under certain conditions outlined in the UAE Labor Law.
No, it is not mandatory to renew a limited contract after its expiry. Employers have the choice to renew or extend the contract if they wish to continue.
Employers do not have the right to dismiss employees on unlimited contracts without a valid reason. The UAE Labor Law offers certain protections to employees under this type of contract. However, the employer can end the contract if the employee violates their contractual obligations or commits gross misconduct.
If the employee wants to terminate the limited term contract before the expiry of the contract, he will be liable under the UAE Labor Law to pay the employer “early termination compensation” of half of three months’ salary, or half of the remuneration for the residual period if the contract has fewer than three months to run.