Limited and Unlimited Contract UAE – Key Differences & Updates
Working in the UAE under a Limited or Unlimited Contract comes with its own set of rules and challenges. Many expats face issues at termination simply because they are unaware of their rights. Knowing the key differences between these contracts can help you avoid unfair treatment and secure what you rightfully deserve.
The UAE is a top destination for job seekers in the GCC, attracting expats from all over the world. With this, the country has strict labor laws that every worker should understand. One key aspect is knowing the difference between limited and unlimited contract UAE, as each comes with its own terms and conditions.
Limited and Unlimited Contract UAE
In the UAE, there are two types of job contracts: Limited and Unlimited. The key difference is in their terms, end-of-service benefits, and termination rules. A Limited contract has a fixed end date, while an Unlimited contract is more flexible. Knowing the difference can help you make better career decisions and avoid legal issues.
Renewal of Limited Contract
A limited contract ends automatically on the specified date without needing any notice. However, it can be renewed if both the employer and employee agree. If the employer is happy with the employee’s performance, they can sign a new limited contract or switch to an unlimited contract. This also applies to domestic workers, who often work under limited contracts and must be aware of renewal conditions to avoid misunderstandings
Early Termination of the Limited Contract by the Employer
If an employer ends a limited contract early for a valid reason, they must compensate the employee with three months’ salary. If less than three months remain in the contract, the employer must pay the remaining wages.
Additionally, the employer must provide salary certification and settle all pending dues, including gratuity, unpaid leaves, and other allowances.
What is an Unlimited Contract in UAE?
An unlimited contract in the UAE is a job agreement without a fixed end date. This means both the employer and employee can end the contract anytime, following the notice period rules. It is a popular choice as it offers better job security, more benefits, and flexibility compared to a limited contract. Employers prefer unlimited contracts for long-term hiring, ensuring stability for both parties.
Termination Conditions in Unlimited Contract
In the UAE, ending an unlimited contract is simple compared to a limited one.
An employer can terminate an employee for a valid reason without paying compensation but must provide a notice period as mentioned in the contract.
If an employee resigns, they don’t have to pay compensation either, but they must serve the notice period before leaving.
Compensations in Unlimited Contract
One of the biggest benefits of an unlimited contract in the UAE is the compensation. Employees get perks like paid sick leave, travel allowance, and other benefits.
Additionally, if an employee works for more than five years under an unlimited contract, their gratuity amount increases each year.
Key Differences Between Limited and Unlimited Contracts in UAE
If you are working in the UAE, it is important to understand the differences between limited and unlimited contracts. Here’s a simple breakdown of how they differ:
Duration
- A limited contract has a fixed end date mentioned in the agreement.
- An unlimited contract does not have a fixed duration and continues until either party decides to end it.
Purpose
- Limited contracts are usually for specific projects or short-term employment.
- Unlimited contracts are for long-term employment with no set end date.
Flexibility
- Unlimited contracts offer more flexibility for employees, making it easier to switch jobs.
- Limited contracts are stricter and bind employees to complete the contract term.
End of Contract
- A limited contract automatically ends on the agreed date.
- An unlimited contract only ends when either the employee or employer decides to terminate it.
Compensation
- Employees under an unlimited contract may receive better compensation and end-of-service benefits.
- Limited contract employees may have fewer benefits in comparison.
Resignation
- In an unlimited contract, employees can resign at any time after serving the required notice period.
- In a limited contract, employees must complete their contract or pay a compensation fee if they resign early.
Termination
- In an unlimited contract, the employer can terminate the employee with proper notice but without extra compensation.
- In a limited contract, the employer cannot terminate the employee before the contract ends without paying compensation.
The Most Recent News Regarding Unlimited Contracts in the UAE
UAE Labor Laws keep changing from time to time. If you are working in the UAE or looking for a job there, staying updated with these changes is important.
No More Unlimited Contracts
As per the new UAE Labor Law, employers can no longer offer unlimited contracts. Now, they must provide only fixed-term contracts.
What This Means for Job Seekers
This change might be concerning for job seekers, but there’s good news too! Private sector employers can still offer long-term contracts instead of just short three-year contracts.
Employers Must Update Old Contracts
All existing unlimited contracts must be converted into limited contracts by December 2023. Employers are legally required to make this change.
Conclusion
Understanding the difference between limited and unlimited contract UAE is essential for expats working in the UAE. With recent changes in labor laws, unlimited contracts are no longer an option, and all employees must now work under fixed-term contracts. Keeping up with these changes helps job seekers and workers make informed career decisions.
