Under the UAE’s updated labour law, most employment contracts are now fixed-term (limited) contracts with clear rules for renewal and termination. Understanding the difference between unlimited and limited contracts is essential for both employers and employees to ensure compliance and protect their rights.
What Are Limited and Unlimited Contracts?
Historically, the UAE offered two main types of employment contracts: limited (fixed-term) and unlimited (open-ended). With recent legal changes, new employment contracts are generally required to be limited, meaning they have a defined start and end date. Unlimited contracts were open-ended and did not specify an end date, but these are being phased out in favour of standardisation.
- Limited (Fixed-term) Contract: Specifies a start and end date, usually up to a maximum duration set by law.
- Unlimited Contract: No specified end date; contract continues until terminated by either party.
If you are unsure about your contract type, or need to convert an unlimited contract to a limited one, a verified PRO or typing centre listed on FindPRO can guide you through the process and paperwork.
Key Differences Between Limited and Unlimited Contracts
While both contracts outline the rights and duties of employer and employee, there are important differences in renewal, termination, and end-of-service benefits. The most notable changes under the new law include:
- Renewal: Limited contracts can be renewed or extended by mutual agreement. Unlimited contracts are no longer generally issued.
- Termination: Limited contracts end on the agreed date unless renewed. Early termination may require compensation. Unlimited contracts could be terminated with notice by either party.
- End-of-Service Benefits: Calculations may differ based on the contract type and duration of service. Always check current regulations with MOHRE or your PRO.
Employers and employees should review current contracts and ensure they comply with the latest regulations. FindPRO’s network of typing centres and PROs can assist with contract reviews and updates.
Transition to Limited Contracts: What You Need to Know
With the implementation of the new labour law, all employment contracts are required to be limited-term. Existing unlimited contracts are to be converted to limited contracts within the transition period specified by the authorities. It is essential for businesses and employees to:
- Review existing contracts and identify those that need updating
- Prepare new limited contract templates in line with MOHRE guidelines
- Notify employees of changes and obtain their signatures on new contracts
- Submit updated contracts through the official channels
Consulting a verified PRO or typing centre via FindPRO ensures your business remains compliant and avoids legal or administrative issues.
Termination and Notice Periods
Termination rules differ between limited and unlimited contracts, especially regarding notice periods and compensation. Under limited contracts, ending the contract before its expiry may require compensation to the other party, unless termination is for a lawful reason as per UAE labour law. Notice periods are typically specified in the contract and must comply with minimum requirements.
For accurate, up-to-date information on notice periods, penalties, and compensation, always confirm with MOHRE or consult an experienced PRO or typing centre registered on FindPRO.
Frequently Asked Questions
Can I still get an unlimited contract in the UAE?
No, under the new UAE labour law, new employment contracts must be limited-term. Existing unlimited contracts are being phased out and must be converted to limited contracts within the transition period set by authorities.
How do I convert an unlimited contract to a limited contract?
You will need to prepare a new limited contract, notify the employee, and submit the updated contract through official channels. A verified PRO or typing centre from FindPRO can handle the process efficiently.
What happens if I terminate a limited contract early?
Early termination of a limited contract may require compensation to the other party, unless there is a lawful reason. Always check the latest MOHRE rules and your contract terms, or consult a professional for guidance.