All about limited contracts in the UAE

When hiring in the UAE, all private sector companies enter into employment contracts with their employees. These are agreements that include all the rights and obligations and are signed by both parties. 

Previously, there was a choice between limited and unlimited contracts that had a number of differences in terms of termination process and end of service benefits. However, following the amendments to the labor law introduced by the Ministry of Human Resources and Emiratisation (MoHRE) on February 2, 2022, only limited employment contracts are issued for individuals who are hired by private sector companies. Note that transition to contracts with a fixed term must be completed by February, 2023!

So, let’s see what a limited employment contract is and how it works in the UAE.

Limited contract in the UAE — How does it work?

What is a limited contract in the UAE? A limited contract is an employment agreement signed by an employer and an employee that goes over rights and obligations of the parties and is valid for a certain time period. In the UAE, this term doesn’t exceed three years. Such contracts are concluded when an employer hires an individual for a particular job position or for rendering a service.

Employment contracts in the UAE are standard. There are certain templates that must be registered with the MoHRE. They differ depending on the type of visa or employment types (full-time, part-time, etc.). 

Contract term

The contract term may vary from 1 to 3 years or as stated in the employment contract. The contract can actually be renewed if the employer and the employee mutually agree to it. Unlike unlimited contracts, limited contracts always have start and termination dates. If both parties (the employer and the employee) don’t mutually consent to renewing the contract, it will be terminated at the end of the validity period.

Contract termination 

A limited contract is terminated if:

• The contract expires and is not renewed by your employer
• The employer and employee mutually agree to terminate the contract before it expires provided that all legal conditions are met
• If the employer or employee violate the legislation or the contract conditions

To terminate a contract, the parties must:

• Notify the other party about their intent to terminate the contract and serve the notice period that was mutually agreed but that doesn't exceed 3 month.
• Keep fulfilling all their contractual obligations during this notice period
• Compensate the other party if applicable

Prior termination of the contract

Although limited contracts in the UAE have end dates where they can be terminated, you or your employer can still terminate such a contract before its end date if there is a valid reason for that. 

Employees can be fired for any legitimate reason on notice without having any additional compensation from the employer.

However, there may be cases when an employee can be fired even without a notice:

• If the employee causes any substantial damage or financial loss, commits forgery, puts the business into risk, or commits any other strict violation
• If the employee refuses to perform their duties after formal warnings or reminders or is absent from work for 20 days intermittently or 7 days in a row without a legitimate reason
• If the employee takes drugs or alcohol at work
• If the employee violates public morals or insults other people in the company.

Employees are also entitled to terminate the contract earlier. However, they have to agree to that possibility in writing beforehand and must give their employer a notice. The notice period depends on the years of service but does not exceed 3 months. 

Under the new law, employees don’t have to notify their employer about their will to terminate the contract in case they face a significant change in their job responsibilities and they didn’t give their consent to this change in writing. 

Employment types under a limited contract

It is good to know that MoHRE has allowed new types of employment under limited contracts. Now, you can enter into such a contract in the UAE and agree with your employer whether you will be working full-time, part-time, remotely, flexible hours, or even temporary. Also, job sharing is possible.