The UAE is a booming employment market for anyone who wants to set sail for a bright future ahead. The government has laid out some prominent and safe laws for anyone who wants to enter into an employment contract. As a new employee or someone on a job hunt, it is important to understand the UAE Labour Law. There are some underlying key differences to comprehend between the two contracts and the possible risks involved, before signing one. To fall on the wrong side of the contract, in a foreign country is the last thing one would want to encounter.

Here are some common differences between limited and unlimited term contracts!

Differentiating Between the Two!

The limited-term contract is a fixed-term contract and is linked with the duration of the UAE residency visa. It will terminate automatically at the end of the contract unless terminated earlier or renewed by either party.

On the other hand, the unlimited-term contract is open-ended and can only be terminated for some serious reasons such as misconduct and any fraudulent activities, as outlined in the law.

Variations

Both the employment contracts vary depending upon their usefulness. Limited-term contracts are appropriate when someone is engaging in a certain project only, or their services are required for a specific time frame only. The timeline for these contracts is known and communicated in advance.

On the contrary, unlimited-term contracts are more commonly used. These are flexible, user-friendly, and used for employees who plan to stay permanently in UAE and work as full-time employees.

Termination Process

Generally, the limited-term contracts have no notice provision and they simply expire once the timeframe completes. However, it will be terminated on the basis of one of the 11 exhaustive grounds under Articles 88 and 120 of the UAE Labour Law.

As for the unlimited-term contract, there are two ways to legitimately conclude the contract. Either by giving a 30 calendar days notice prior or on misconduct reason as per Article 88 and 120 of the Labour Law.

Gratuity Service

The gratuity service remains the same for both contracts. An employee who has completed one year or more of continuous service is entitled to end of service gratuity calculated as follows:

• 21 calendar days’ basic pay for each year of the first five years of service.
• 30 calendar days’ basic pay for each additional year.

Provided that the entire total remuneration does not exceed two years’ pay.

An employee is not entitled to end of service gratuity where he has been terminated summarily for gross misconduct pursuant to the provisions of the UAE Labour Law.

However, in the case of an unlimited term contract, an employee is not entitled to end-of-service gratuity where he has been terminated summarily for gross misconduct pursuant to the provisions of the UAE Labour Law.

Checklist

As per the UAE Labour Law, a limited and unlimited-term employment contract must clearly specify these:

• date of its conclusion
• The date on which work begins
• nature of the work
• workplace
• amount of the remuneration

In addition to these, the limited-term employment contract should clearly specify the duration of the contract. This remains imperative when ensuring the applicability of the contract.

The Way Forward

For employees or job seekers, it is important to know the key differences between the two, especially when entering the contract. Later, if anything goes wrong, one can also seek protection via a law firm as well. Nevertheless, understanding the terms remain vital for either party entering the contract.