A limited contract in UAE is a fixed employment contract with a pre-defined end-of-service date and limited time. Usually, limited employment contracts consist of two or three years. The limited contracts will automatically end on the expiry date for the end-of-service. It can be renewed by the mutual agreement of employer and employee with specific terms and conditions according to the law.
In this article, we learn what is a limited contract in the UAE? its benefits, and its detailed overview. Let’s explore;
What is a Limited Contract in the UAE?
The limited contract in the UAE is a short-time or fixed contract with a pre-defined date for the end-of-service. This contract is project-based employment for a limited period and usually continues for two years. These limited contracts automatically expire on a pre-specified date mentioned in the contract. The limited contracts can be renewed and extended with the agreement of both parties.
Differences from Unlimited Contracts
The unlimited employment contracts have no specific time for expiry. However, limited contracts are typically two or three-year fixed terms of employment and automatically expire at a specific date. The employer and employee can extend limited contracts with mutual understanding.
What is the notice period for limited contracts in the UAE? Unlimited employment contracts are open-ended contracts that provide flexibility and require a minimum thirty-day notice period for resignation or termination from both parties. This type of employment provides end-of-service benefits, gratuity funds, and other perks. Limited contracts are based on specific duration, and unlimited contracts consider the full employment period.
Benefits and Considerations of Limited Contracts
The benefits of limited contracts in UAE provide flexibility for companies with temporary work requirements and allow employees to practice a new role. However, employment security and other perks like end-of-service compensation and gratuity funds may be less than unlimited contracts.
Advantages for Employers
Limited employment contracts provide several benefits for companies to fulfill their temporary requirements. Companies and organizations can hire staff for temporary needs, specific projects, or seasonal work requirements without long-term employment benefits and commitments. Limited contracts also have specific dates for the end of employment and don’t require any notice period for end-of-service. Employers may benefit from cost savings on gratuity funds, based on the contract duration and usually offered for full employment.
Advantages for Employees
Limited contracts are beneficial for employees seeking particular career goals. They can get an opportunity to work in new fields and multiple industries without a long-term contract. It can be beneficial for students and fresh graduates who have transitioning careers. These limited contracts offer higher salaries, bonuses, and more attractive packages appealing to employees for limited employment. Students can leverage the limited contracts for flexibility and start further education after the end of employment.
Important Considerations
The important considerations in the new labor law for limited contracts in the UAE are;
- The limited contract renewal depends on the understanding and agreement of both parties.
- The limited contracts provide lower benefits at the end of employment.
- The limited contract in the UAE needs to be cautious about the terms and conditions.
- This type of contract has few limitations for a job, and employees require a No Objection Certificate to switch jobs in the UAE.
Legalities and Regulations Surrounding Limited Contracts
Limited contracts in the UAE have such regulations;
- These contracts will renew at the expiry date with the employer and employee’s agreement to extend the term of employment for a certain period.
- Employers provide a minimum of three months’ compensation in case of early termination, and employees who quit the job early may receive the last month’s salary.
- Limited contracts have a maximum duration of three years of employment.
- The end-of-service benefits are lower than unlimited contracts based on employment terms and duration.
- The probation period of three to six months may apply for limited contracts.
Recent Changes in UAE Labour Law
Limited contracts are now popular for flexibility. Employee benefits are improved for extended leave allowances, such as sick leave, bereavement, and studies. A flexible work schedule and short time span are attractive for employees. These recent changes offer a more balanced work-life and enhanced employee rights in the UAE labor law.
Contract Duration and Renewals
Limited contracts are usually for one, two, or a maximum of three years, aligned with the residency and work visa. Short-term employment provides flexibility on project-based work requirements for employers.
The limited contracts automatically end on a specified expiry date until both parties agree to extend the contract for a certain period. The renewal of the contracts may have the same duration or extended terms of employment. However, if the employers terminate the employees before the expiry date of the limited contract, they must provide three months of compensation.
Termination Clauses and End-of-Contract Procedures
The termination clauses and end-of-contract procedures before the expiry date are explained in the limited contract. It has outlined the details for notice periods, which initiates the termination, compensation, and more.
In case of early termination from the employer, a minimum notice period is three months with the full salary. Employees who switch jobs before the expiry date of limited contracts will receive half of this compensation. At the end of the limited contract, the final settlement includes full salary payment, vacation pay, and gratuity funds based on the terms of the contract.
Conclusion
The UAE has an evolving labor market, and the limited contract is a flexible option for employees seeking short-term employment. It’s beneficial project-based work and hiring short-term staff with no long commitments. The students and new learners can work for the short term and gain experience with flexible hours and passive income.
Employers and employees must know the legal obligations for the fixed terms of service, renewal of limited contracts, upcoming challenges, end-of-service or expiry dates, gratuity funds, and other rules according to the contract. You can ensure a smooth experience with limited contracts considering these aspects and benefits according to the UAE labor law.
FAQs
How does a limited contract work?
A limited contract is a fixed term of employment that ends on a specific expiry date automatically. It can be renewed with the employer and employee’s agreement to extend the employment.
If I have a limited contract, can I resign from it?
Employees can leave with a notice period and resignation before the expiry date of the limited contract and NOC from the employer to join the other job.
Is it true that limited contracts are prohibited?
Limited employment contracts are not prohibited and are usually accomplished for temporary hiring on project-based work in the UAE.
