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Types of Employment Contracts in UAE

There are 2 types of employment contract in UAE. You will encounter either of them once you’ve started working here. There may be differences and similarities depending on the specific provisions. It is important for an expat to understand the law governing each contract type so it will be easier when you switch to a different contract.

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Provisions such as the notice period, end of service gratuity, resignation, and labor ban are included in each type of contract. Whether you are under limited or unlimited contract, you have to read the rules and regulations below for your own convenience.

Contract Agreement

Difference Between Limited and Unlimited Contracts

  • The unlimited contract is an agreement where an employee has unlimited time to be employed, not unless he gets terminated or resigned.
  • The limited contract is an agreement where an employee gets employed within a fixed period. For instance, you may be under a limited contract for 2 years.

Notice Period

  • The unlimited contract, the notice period should be 30 calendar days before the actual termination of the labor contract. An employee can resign without notice period under the circumstances when there is an employee assault or employer’s failure to do his obligations.
  • The limited contract, notice period is not specified for how long since there is an actual specification within the contract itself. Below are the guidelines:
    • If the employer terminates the contract for any reason, he should compensate the employee equal to 3 months salary or remaining period before the contract expires, whichever is shorter.
    • If the employee terminates the contract for any reason, he should compensate the employer equal to 1/2 of 3 months salary or remaining period before the contract expires, whichever is shorter.

Resignation

  • The unlimited contract, an employee can resign provided he gives 30 days notice period before leaving the company. The employer may, however, extend the 30 days up to 3 months depending on the labor need and what was agreed upon.
  • The limited contract, an employee may resign provided he understands the consequences written on the contract. This is why it is always important to read the contract first before signing.

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End of service gratuity

  • The unlimited contract, an employee who completed at least 1 year of service in the company can receive an end of service gratuity pay. If below 1 year, an employee won’t receive this kind of benefit.
  • The limited contract, an employee who completed at least 2 years of service can receive the end of service pay. If below 2 years, no entitlement is given.

Labor Ban

  • The unlimited contract, a labor ban may be imposed on the employee if the termination of a contract is not agreed upon.
  • The limited contract, a labor ban is usually imposed when an employee doesn’t finish the contract or resigns before the contract expires.

These following key points are important for expats across the country of UAE. If have friends and family who work there, don’t forget to share this information with them.

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