Limited and Unlimited Contract in UAE Labor Law

It is important as an employee that you should familiarize yourself with the labor laws of UAE so you know what you are committing yourself too.

There are two types of labor contracts which are as follows,

1- Limited Contract

This type of contract is for a limited time period which has a start date and an end date which is for two years and cannot exceed the term. It also must mention the notice period either it be a minimum of one month or maximum three months.

The contract will end once it completes two years term, or if both employer and employee mutually agree to end it, or if the employee commits any illegal act as per Article 120 of labor law.

In case if the employer singly wants to terminate the contract or renewed contract earlier with the reason not stated in Article 120 of labor law then the compensation to be given is of three months advance salary or the remaining period of the contract whichever is a lesser amount.

Same applies for the employees if they decide to resign with the reason not stated in Article 121 of labor law then they have to compensate with a half months salary for a period of three months or the remaining period of the contract whichever is a lesser amount.

2- Unlimited Contract

This type of contract has a start date but no end date known as an open contract. It can be terminated by any of the parties either be it the employer or the employee honoring the requirements of the notice may it be the notice period of minimum one month or maximum three months. However with the consent of both parties the contract may be terminated without notice requirements (notice period).

In case if the terminating party does not comply with the notice requirements for the early termination then they will have to face legal charges and compensate the other party.