Employment contracts- Limited or Unlimited

Permitted terms in employment contracts: Two types of employment contracts are allowed in the UAE – As per Article 38*(*selected Articles at the end of the page) of the Federal Law, a contract of employment may be for an unlimited or for a limited period. If it is for a limited period, the contract shall not exceed four years and the contract may be renewed by mutual agreement between the parties for a similar or a shorter period on one or more occasions where a contract is renewed. The further period or periods shall be deemed to be an extension of the original period and shall be added thereto when calculating the worker's total period.

Therefore, the Article allows both parties - the employer and the employee - to select the contract type.

In Unlimited contract, both the employer and the employee may terminate a contract of employment of unlimited period for a valid reason at any time following its conclusion by giving the other party a notice in writing at least 30 days before the termination.

As for the difference between unlimited contract and the limited, we quote the following as per Article 117:

1. Both the employer and the employee may terminate a contract of employment of unlimited period for a valid reason at any time following its conclusion by giving the other party a notice in writing at least 30 days before the termination.
   In case of workers working on a daily basis the period of notice shall be as follows:
   1. One week, if the worker has been employed for more than six months but less than a year.
   2. Two weeks, if the worker has been employed for not less than one year.
   3. One month, if the worker has been employed for not less than five years.
2. The limited contract, according to Article 115 and 116 of the Labour Law, is a contract of employment for a limited period of time and if the employer revokes it for reason other than those specified in Article 120 he shall be required to compensate the worker for any prejudice the latter sustains, provided that the amount of compensation shall in no case exceed the aggregate remuneration due for a period of three months or the contract contains a provision to the contrary where a contract is revoked by the worker for reasons other than those specified in Article 121 he shall be required to compensate the employer for any prejudice the latter sustains as a result provided that amount of compensation shall not exceed half the worker's remuneration for three months or the residual period of the contract whichever is shorter unless the contract contains a provision to the contrary.

Information should be stated in an employment contract

The information required by law to be specified in an employment contract is the following:

1. Wages/remuneration payable.
2. Date of the employment contract.
3. Date of commencement of the employment contract.
4. Nature of the contract (limited or unlimited).
5. Nature of the work.
6. Duration of the contract (for fixed term contracts).
7. The location of employment.

The labour office at the Ministry maintains standard employment contracts in Arabic and English, where the employer and the employee need only fill in the blanks. It is however not compulsory for the parties to use or file these contracts at the Ministry and may instead draft and lodge their own employment contracts at the Ministry providing they do not contain provisions which are contrary to the Law and are in the Arabic language.

Vithul V Murali 
Al Zaeim Corporate Services 
Dubai Mobile : +971 50 55 73 538

Email  :Vithul@a2zconsultus.com

Skype : Vithul.murali

courtesy : hafner