What is the main difference between a limited and unlimited contract in the UAE?

The landscape of employment contracts in the UAE has gone through a significant change in recent years. Both parties should consider to have their limited or unlimited contract in UAE. The choice between unlimited or limited contract in UAE shall have a great impact on your future. Since it can alter the course of the professional career and the understanding of working relationships.

In this article, we get to the bottom of the complexities of contract types in the UAE, distinguishing what is unlimited contract in UAE. We consider the duration of employment term from looking at notice period requirements to legal protections. We hope to provide a comprehensive guide that would help in making correct decisions regarding their employment contracts.

How does the duration of employment differ between limited and unlimited contracts?

The duration of a contract in the UAE can be either limited or unlimited in length. Both employers and employees should know the difference between limited and unlimited contract in UAE, to avoid legal issues.

Limited Contracts:

• Fixed Duration: Workers under fixed-term contract agreements are given the specific dates of their fixed-term employment agreements on the first day of their employment.
• Expiration: At the end of the contractual period, the contract terms expire. Unless the employer and employee conclude an agreement of renewal of the contract.

• Flexibility: Limited contract gives employers more flexibility especially for projects based on the current business things. With this, they can adapt their workforce to the changes in the business situation.

Unlimited Contracts:

• Only in unlimited contract in UAE the cut-off date is not set in contrast to the limited ones. Although they last for the long while, they can be terminated by any of the parties at any moment.
• Stability: Job security and job stability are among benefits of unlimited contract in UAE as they promote long-term employment.
• Permanent Roles: Such contracts are often the best ones since they usually indicate permanent jobs that these businesses intend to keep for a long period.

Can you explain the renewal process for limited and unlimited contracts?

Signing renewal contracts in the UAE, include a number of stages and steps. Which have to be followed by employers and employees. Complying with the legal requirements and effective communication facilitate a hassle-free renewal for both limited and unlimited contract in UAE.

Limited Contracts:

• Notice Period: Employers are provided by the authorities with upfront notice concerning the renewal of the limited contracts. The notice period which is clear in the contract, must be set and complied with.
• Negotiation: Employers and employees may agree on the terms of renewal. Either before the contract expires or after it expires, depending on the situation. Including the adjustment of the salary, the new benefits or any changes in the job responsibilities or the working conditions.
• Formal Agreement: When both employers and employees reach an agreement to renew the contract, it is normal to have a formal contract. Documenting the new employment terms and conditions and signed to confirm the employment renewal.

Unlimited Contracts:

• Continued Employment: Unlimited contract in UAE has no set date of ending. There might not be a formal renewal process as the limited types of contracts do.
• Confirmation of Employment: Nevertheless, employers are still able to give employees a written confirmation to say that the employment will be on an unlimited duration.
• Review of Terms: Both employers and employees might utilize the renewal period in order to examine the changes in the employment terms and conditions.
• A thorough communication and due observance of the legal requirements can provide an easy renewal experience for both types of contracts.

What are the notice period requirements for termination under limited and unlimited contracts?

In the UAE, the employer and employee should be aware of which notice period is required under the UAE law. The employer has to ensure compliance with labor laws of the UAE even in cases of termination.

Limited Contracts:

• Notice Period: The contractual dismissal of the employment should be in accordance with a notice which is set in the contract. The employer will require a 30-day notice period and so will the employee. It may be flexible depending on the terms agreed upon by the employer and the employee.
• Legal Requirements: The UAE labor law requires the employer to give the minimum notice period for the termination. The notice period varies with the length of the service.
• Severance Pay: Employers will have to pay severance packages or other end-of-service benefits as provided by the law.

Unlimited Contracts:

• The contract period of a Fixed term contract is set in the UAE Labour Law. It needs notice of 30 days from the employer. On the other hand, the notice is one month from the employee whose service is less than 1 year. For the employees with more than a year of service, the notice period is up to 3 months.
• Notice Period: In the same way, termination will have to go according to the notice period though the length is not explicitly in the contract.
• Legal Requirements: The UAE labor law has minimum notice periods for termination under unlimited contract in UAE. This are usually longer than those for limited contracts. Such notice periods differ on a case-by-case basis depending on factors such as duration of service and position of an employee.

Are there any restrictions on terminating a limited or unlimited contract in the UAE?

Due to limited duration, termination of the contract is typically done in a simplified manner by both the parties.

• Fixed Term: Terminating the employment under a limited contract before the expiry of the contractual agreement may undergo limitations and penalties.
• Early Termination Clause: Some of the limited contracts may include the clauses stating the situations allowing an early termination, such as consent from both parties concerned or some specific cases outlined in the contract.
• Penalties: In case of employers terminating the limited contact type contracts before their expiry date, they may be required to pay their employees for damages incurred as a result of the early termination, including the payment of salaries for the remaining contract terms.

Ending an unlimited contract in UAE tends to be much more complicated, and it entails meeting some specific legal requisites. Employers have to provide the laid down reasons for termination; such as, poor performance, misconduct and redundancy should comply with the stipulated notice periods.

• Flexibility: An unlimited contract cancellation of work allows more flexibility in comparison to a limited contract.
• Notice Period: On the other hand, companies have to give its employees the correct notice period. Or pay in lieu of notice in accordance to the UAE labor law.
• Legal Grounds: Termination of an unlimited contract should be on a valid legal basis. For instance, disciplinary reasons, performance issue, or by mutual agreement of both parties.

Having knowledge of the restriction and legal conditions for the dismissals of employment contracts is a must. As a result, you can prevent disputes and be compliant with the labor laws in the UAE.

What benefits and compensation are provided under limited and unlimited contracts?

The UAE Labour Law mandates certain benefits and compensation for employees, including:

• Basic salary
• Overtime pays
• Annual leave
• Sick leave
• End-of-service gratuity

However, there is a difference between limited and unlimited contract in UAE regarding the calculation of gratuity:

Limited Contracts:

• Workers have the right to end of service entitlements. Which is paid in lump sum depending on the length of service and the last basic salary. Gratuity becomes payable either after the contract period completes or in the event of a termination.
• The leave entitlement during the course of the year starts from 21 to 30 days in a contract. Depending on the length of the service and additional terms.
• One of the ways that some companies offer medical insurance for part-time or temporary employees is to provide limited coverage.
• The employee will not be entitled for gratuity if his employment is terminated before completing one year.
• Gratuity in proportion to work completed for those who leave service according to 1 to 5 years’ period.
• 100% gratuity if dismissed by the employer without fault after 6 months.

Unlimited Contracts:

• Employees under unlimited contract in UAE are entitled to end-of-service gratuity based on the length of service and the final basic salary. The gratuity is payable upon termination of employment.
• Also, they receive annual leave benefits as per the UAE labor law. Typically ranging from 21 to 30 days per year, depending on the length of service.
• Depending on the employer and the terms of the contract, employees under unlimited contracts may also receive additional benefits. Such as housing allowance, transportation allowance, or education assistance.
• Full gratuity based on total service upon completion of 1 year or termination by the employer without fault.
• Pro-rated gratuity for termination by the employee with 1-3 years of service, full gratuity for 3+ years.

How does end-of-service gratuity differ between limited and unlimited contracts?

The calculation formula for the end-of-service gratuity remains the same in the case of both limited and unlimited contracts. However, the timing of the pay-out could be different.

For the limited contracts, gratuity is normally paid upon the termination of the contract period. But in the case of the unlimited contract in UAE, it is paid upon termination of employment.

It is important knowing the contractual terms and rights under different kinds of employment in the UAE.

Limited Contracts:

• Calculation Basis: The computational method of the end-of-service gratuity is based on the length of service and the last basic salary. The gratuity amounts often go up when the years of service are longer.
• Payment Timing: The employees have the right to their end-of-service gratuity upon the expiration of the duration of contract or when they leave. In effect, this payment is the form of financial remuneration for the employee for the service rendered to the corporation.

Unlimited Contracts:

• Similar Calculation: The structure of gratuity at the end of the unlimited contract in UAE, follows a similar computational approach. Consisting of the length of service and the employee’s final basic salary.
• Payment Timing: Terminations of employment of those under unlimited contracts will entitle them to the gratuity given to employees at the end of service. This happens in case of resignation, retirement, or termination due to the company.

Can an employee switch between limited and unlimited contracts during their employment?

While it is possible to switch between limited and unlimited contracts in the UAE, it is not a straightforward process. You should considerate several factors:

• Mutual Consent

One of the conditions is to have mutual consent from both the employee and the employer. The parties should prepare for the new type of award.

• Legal and Regulatory Compliance

In this case, the company has to comply with the UAE Labour Law and visa status rules. This may be associated with the submission of the request for the permit to the Ministry of Labour. Furthermore, obtaining an Emirates ID and work permit upon change of visa type and duration is crucial.

• Contractual Modifications

Write a new contract document with clear terms and conditions and both parties have to sign it. It also declares the effective date of the new contract, as well as any required changes of benefits, compensation, provisions or other terms.

• Potential Challenges

Moving contracts might include some inhibitions, such as:

• • Negotiation process: Where the employer and the employee come up with new terms and conditions.
  • Administrative hurdles: The procedure for getting approvals and processing the required documents can be very lengthy.
  • Impact on benefits: This can be the calculation of the tipping or other benefits. In the case of contract type and the length of service due to the counterpart.
• Seeking Professional Guidance

Given that the process is complex, we suggest you to consult a lawyer or the immigration consultant. They can guide you to make sure you adhere to the law.

What legal rights and protections do employees have under limited and unlimited contracts?

Legal employees in the UAE have certain legal rights and protections under the UAE Labour Law. These rights secure the employer’s impartiality, safe working conditions, and basic labor standard. Here is a breakdown of some key rights and protections:

• Minimum Wage: Both types of contracts ensure employees a minimum wage rate as stipulated by the UAE government.
• Safe Working Conditions: It is the mandate of employers to create a healthy and safe environment. Where workers can be free from danger and risks.
• Non-discrimination: The employees have the right to not to be discriminated against on the basis of, race, religion, gender or ethnicity.
• Regulation of Working Hours and Overtime Pay: Working hours are limited by law. Employers have to pay their employees for extra working hours.
• Paid Leave Entitlements: While the contracts allow the staff to have paid holidays, sick leave and other types of leave as per the Labour Law.
• Fair Termination Procedures: Termination of employment needs to follow the law. This contains required procedures providing a ground for fair dismissal and preventing the case of disputes.
• Right to Join a Trade Union: Employees count on the law protection. Also, they have the right to join or form trade unions as an instrument for more favorable work conditions or channel their discontent.

Unlimited contracts offer some additional protections:

• Unlimited contracts guarantee more security and stability, while the limited contract, which is set to a certain date.
• Upon completion of a year or work, an employee with an unlimited contract receives a full end-of-service gratuity that is based on his/her total salary and service duration.

Are there any specific visa or sponsorship requirements associated with limited and unlimited contracts?

Employee sponsorship for residency visas is vital for employers in the UAE. Regardless of the contract type, it has to comply with immigration law.

• The sponsor relationship between employer and employees is a requisite for the UAE workers in either of the contract types. It is the obligation of the employer to go for the work visa and residence permit provided to the employee.
• Particular visa categories can correlate to specific job titles or employment classes. The type of visa will be based on the qualifications of the employee, his position and other relevant factors.

Limited Contracts:

• Sometimes, the contract needs a particular visa type. Where with unlimited contracts the visas may be for a longer period of time. This can apply in case of project-specific roles or short-term jobs.
• Renewal of the visa could be concurrent with visa extension for short term contract, leading to a re-application with the contract extension.

Unlimited Contracts:

• A long-term contract might also make it possible to choose your visa types and terms. There will be a possibility for employees to get visas for a longer period. Resulting in reduction of their need for frequent renewal of the visas.

Additional Considerations:

• Individual circumstances: Visa requirements are likely to be related to the employee’s citizenship, professional activities or certificates.
• Visa processing times and costs: Processing time for different visa types as well as its associated fees vary depending on both visa type and additional factors.

Do limited and unlimited contracts have different requirements for visa cancellation or renewal?

While both limited and unlimited contracts involve employer sponsorship and visas, there can be subtle differences in their requirements for visa cancellation and renewal:

Limited Contracts:

• Visa cancellation: The visa is often valid for a term of the contract. As with the cancellation of the contract, in general the visa is withdrawn along with the termination. This signifies that an employee must leave the country, and if they extend the contract or get new employment, then a new visa must be applied for.
• Visa renewal: When the employer signs the contract extension agreement, they must apply for another visa and obtain a new one for the employee. The regulatory conditions may vary for different visas and per-case requirements. The processing may have different durations depending on the visa type and the case.

Unlimited Contracts:

• Visa cancellation: Unlike limited contracts, the visa for unlimited contracts are not tied permanently to the employment contracts. While if the employment is terminated, the employee often receives a grace period of approximately 30 days in order to finish the employment and leave the country. That period, the visa remains operative.
• Visa renewal: Overcoming this problem is the process for renewing unlimited visas contracts, which is more flexible. It varies upon visa type and individual circumstances but employees can have longer durations for visas and experience fewer renewals than those on limited contracts.

Are there any limitations on working hours or overtime pay under limited and unlimited contracts?

Any restrictions regarding the working hours or overtime pay of the employees are not based solely on the type of contract (limited or unlimited) present in the UAE. Both types of contracts are under the UAE Labour Law which established some rules regarding working hours, and overtime pay.

• Standard Working Hours: The standard working week of the UAE consists of 48 hours. This applies to both types.
• Overtime Pay: Employees have a right to receive payment for any overtime worked. This is beyond the maximum of 48 hours per week. Calculation of overtime payments is also subject to the Labour Law which in this case involves a higher rate for every hour as compared to the wage when working the regular hours.
• Exceptions: Some occupational groups or sectors might have additional arrangements as related with working hours or alternatively as stated in the Law or other special regulations.

Hence, both limited and unlimited term contractors have the same rights and entitlements on working hours and overtime pay just like permanent employees. The particular calculation of the overtime pay may differ as per the factors e.g. the employees’ weekly salary and the overtime rate.

Employees need to know their rights and responsibilities regarding the working hours and overtime pay stipulated in the UAE Labour Law. If you have queries or problems with regard to your working hours or overtime pay, you should contact your employer or the Ministry of Labour and ask them to solve the problem.

How does the process of filing disputes or grievances differ between limited and unlimited contracts?

In the UAE, the principle of resolving disputes or grievances has an insignificant difference whether it is for employment or a regular contract. Both types of employees follow a similar approach:

• Internal Grievance Procedures:

The first step is raising the issue internally with the employer via the existing grievance mechanisms like the employee contract or the company policies. It could be in the form of communication with supervisors, Human Resource people, or the management of the particular organization.

• Ministry of Labour:

If internal resources are not enough to resolve the issue, the employees can opt for the Ministry of Labour (MOL). The MOL sets up mediation and conciliation systems that provide a platform for the resolution of workplace conflicts. Lodging a complaint with the MOL usually means to fill in a complaint form and enclose supporting documentation.

• Courts:

In case mediation or conciliation through the MOL are not successful the parties in dispute can choose a court for judicial decision. This is an option that uses court proceedings. They are often more complicated and so it will take a longer time to be done.

Consultation with a seasoned legal practitioner dealing with the UAE Labor law would be a priceless asset. Keeping copies of all necessary documents, communication records, and anything that is supporting evidence of your case relevant is very important for your case presentation.

Are there any specific industries or job roles where limited or unlimited contracts are more common?

While both limited and unlimited contracts apply in the UAE, their prevalence can vary depending on the industry, job role, and specific circumstances:

Limited Contracts:

Industries:

• Construction: Project-based working can use contracts with a limited term according to the schedule. Finally, it is important to encourage a positive and supportive workplace culture.
• Engineering: Akin to the construction, some limited term contracts too can be for project durations.
• IT: Some smaller projects in IT or brief consultancy contracts for particular skills could fall under short-term contracts.
• Events and hospitality: Temporary or seasonal positions as well as the engagement of limited- contract employment might be used.

Job Roles:

• Freelancers or consultants: Professionals for particular projects may be engaged on contractual basis. This is basically because it is a limited engagement.
• Contractual positions: There might be several roles, where terms are contractual with specific duration.
• Temporary replacements: Wrapping up in temporary staffing to cover a leave of absence or a maternity leave might be within the realm of limited contracts.

Unlimited Contracts:

Industries:

• Finance and banking: These industries are usually more stable and permanent.
• Healthcare: Hiring doctors, nurses and other health professionals as long-term contractual positions.
• Education: Positions as teachers and administration within educational institutions usually employ lifetime contracts.
• Government and public sector: Public Administration jobs such as permanent positions in the various government agencies and public institutions are generally with no contract time limit.

Job Roles:

• Management and leadership positions: These are roles that need durable and stable commitment and relationships.
• Senior professionals and specialists: Professional individuals who have worked in multifarious tasks may also be on the same scale.
• Sales and marketing: Unlimited contracts empower sales professionals to build authentic partnerships and cultivate long-lasting client relationships.

What factors should employees consider when choosing between a limited and unlimited contract in the UAE?

Deciding between a limited contract and an unlimited contract in UAE needs a lot of calculations to consider the factors that can impact your career path, financial stability, and well-being. Here are some key aspects to evaluate before making a decision:

Career Goals:

• Long-term stability: If your goal is the long-term career development and stability, limited contracts might be less appropriate. Since they do not assure you the security and the continuity that unlimited contracts provide.
• Flexibility: Depending on the level of flexibility and interest towards different projects or roles, a limited contract can be preferable, especially for short-term assignments or projects.

Job Security:

• Contract duration: Limited contracts usually end at a specified date, which means you will have to think about looking for a job and fill in the gaps in your career if you decide to not resign on the expiration date.
• Renewal options: Even though some short contracts provide possible renewals, the employer still has the final say in the matter and no guarantees are made for future services.

Benefits and Compensation:

• End-of-service gratuity: There are different ways to compute gratuity in different contract types. The gratuity as regards the unlimited contracts is paid in full either upon the expiry of one year or of termination of employment through no fault of the employer.
• Other benefits: The contracts do have certain mandated benefits such as annual leave and sick leave. There might be some variations in the benefits of unlimited contract in UAE.

Risk Tolerance:

• Job security concerns: Complicated contracts have more of a risk of employment security being uncertain in future, which may be unappealing to some people.
• Career planning: With a limited contract, it is essential to bear the career planning constraints in mind and look for new prospects even before your contract expires.

How to check limited and unlimited contract in UAE

There are several ways to determine whether your employment contract in the UAE is limited or unlimited:

• Review the Contract Document:

The most obvious approach is simply to go over the contract document itself. It should clearly provide the type of contract, whether limited or permanent. Seek the part which expresses the duration of the contract or mentions partial or full termination terms.

• Consult Your Employer:

If the contract is not clear or you think it is not about its job title you can just ask your employer directly. They should be in the position to know what kind of contract you have and to what terms and conditions it is in a position to.

• Ministry of Labour (MOL) Website:

In a few situations, you may discover information concerning your employment contract from the website of the Ministry of Labour (MOL). However, you have to login in using your Emirates ID and go to the features that are specific to employment status.

• Seek Professional Assistance:

If you have any doubts with regards to the type of contract that you have or require further clarification, you can opt to seek professional assistance from a lawyer who handles UAE labor law. They can also teach you how to check limited and unlimited contract in UAE, make client-oriented interpretation, and answer your queries.

Notice period for unlimited contract in UAE

The notice period for unlimited contract in UAE is as follows:

• Employers: Whether an employee serves a few weeks or years in the UAE, employers have to provide notice of minimum 30 days before terminating an unlimited contract. This gives the workers that time to look for other employment opportunities and prepare for the transition.
• Employees: The notice period for employees varies with their years of service. Employees with a shorter length of service typically have to give a shorter notice period.
• Less than 1 year: If the employee has been working for less than 1 year, they have to comply with 1 month notice before resigning.
• 1 year or more: In case the employee has put in at least 1 year or more of service the resignation is a notice of 3 months period.

About Connect Staff

Connect Staff, a company that has been known as one of the best recruiting firms that provide temporary and permanent staffing services in Dubai and the whole of UAE, is on your side. We recognize that there are the peculiar needs of the businesses and job seekers in the region, offering the fullest range of opportunities for the events and business staffing.

Our team of experienced professionals can help you to:

• Understand the complexity of having limited and unlimited contracts in the UAE.
• Avail yourself of the position of higher employment supported and confirmed by the best agreements.
• Guide the employees through the intricacies of visa and sponsorship necessities.
• Comply with the labor laws and regulations in the United Arab Emirates.

Whether you are a recruitment specialist seeking best talent or you are a job seeker looking for your perfect job, Connect Staff is always a right partner for you in this area. Contact us now and let us get your staffing issues, handled in the UAE.