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What is Limited and Unlimited labour Contract in the UAE ?

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Whether the labor contract is limited or unlimited is a key factor to examine in the event of a legal dispute between an employee and employer. When it comes to issues like resignation, termination of employment, notice periods, and the computation of end-of-service benefits, knowing the essential terms of each contract type under UAE labor law is crucial. This blog explains  limited and unlimited labour contract in the UAE in detail.

  • First, if you have an infinite contract with your employer, you must give them at least 30 days’ notice before you can fire them (Article 117).
  • Alternately, if the employer fails to meet their commitments, or if the employer or their legal agent commits an act of assault against the employee, the employee may resign without giving notice in accordance with Article 121.
Gratuity Payments at the End of an Unlimited Contract Term 2

The following end-of-service gratuity provisions apply if the employer terminates the contract: Article 132.

  •  Each year of service after the first five earns you an additional 21 days of basic pay.
  •  If you stay for more than five years, you’ll get an extra 30 days’ pay every year, up to a maximum of two years’ pay.
  •  If an employee is fired without warning for serious misconduct, they are not eligible for a severance package.
Termination of an Unlimited Contract
  • In accordance with Article 117, either party to an unlimited contract (employer or employee) may cancel the contract with at least 30 days’ notice to the other party. The notice period may be extended by the employer, up to a maximum of three months. Taking Articles 120 and 121 into account, an employee who fails to give proper notice to their employer may be held liable for lost wages during that time.
  • If the employer wants to fire an employee, they need to have a good reason under Article 120 or the employee needs to be doing poorly according to the terms of their contract. If the company fires an employee without a good reason, it’s regarded arbitrary and the worker is entitled to three months’ pay in damages.
  • Even if the employee decides to resign during the probationary term, the company can still require 30 days’ notice.
  • In the event of a termination of an unlimited contract without mutual consent, the employer may impose a labor prohibition.
Limited Contract 
  • Since the duration of a limited contract is set forth in the contract itself, there is no set notice time for such agreements.
  • The company must pay the employee three months’ salary or the remainder of the period, whichever is shorter, if the employer unilaterally revokes a limited contract for any reason other than Article 120 (Article 115).
  • if an employee terminates a limited contract without cause (Article 121), they must pay the employer a sum equal to half the employee’s monthly salary for the remaining three months or the remainder of the contract, whichever is less (Article 116).
limited-term contract’s end bonus 
  • Gratuity at the end of a fixed-term contract is determined as follows.
  • Article 138 states that the employee is not entitled to any benefits if the employee voluntarily cancels the contract prior to the end of the agreed-upon period or before completing five years of continuous employment.
  • Employees who have been with the company for at least a year are entitled to severance pay if their employer unilaterally ends their employment contract prior to the end of the term, unless the termination is in accordance with Article 120 or Article 132.

To know about labour litigation click here

Click here to visit the ministry of labour

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