UAE LABOUR AND EMPLOYMENT LAW | LABOUR AND EMPLOYMENT LAW IN UAE
Federal Law No. 8 of 1980 governs labour rights of employees in UAE public and private sector. Except for certain categories of employees, this law applies to all employees working in the UAE, whether UAE nationals or expatriates.
In turn Ministry of Labour is the overseeing authority responsible in maintaining the proper implementation of labour rights and responsible implementation of the labour laws and regulations.
UAE Labour Law provides the framework relating to the following core employment facets: employment contract bound and conditions relating to working hours, termination of employment, end of service gratuity payments and notice period, vacation and public holidays, sick leave, maternity leave and annual leave.
UAE employment contracts are categorized into two classification: limited and unlimited contracts. Major distinction between these two types of employment contract are as follows:
- Limited contract is a fixed term and it will automatically terminate at the end of the term unless terminated earlier by either party or renewed by both parties. On the other hand, unlimited contract is an open-ended and maybe terminated in accordance with the conditions set forth in the UAE Labour Laws.
- Limited term contracts have no notice provision and will expire at the end of the term. On the other hand, under the UAE Labour Law, there are two main ways for an employer to legally terminate an unlimited term contract – minimum notice period of 30 calendar days unless otherwise agreed on longer notice period; without notice period if the reason of employment termination is grounded for one of the 11 exhaustive gross misconduct reasons set out in Article 88 and 120 of UAE Labour Law.
- In the event, the employee desires to terminate the limited term contract before the expiry of the term, he will be liable to pay the employer “early termination compensation” or half of three months’ salary or half of the remuneration for the residual period if the contract is less than 3 months prior to its expiration. On the other hand, in an unlimited contract, an employee may resign by providing 30 days’ notice period. However, the employee may resign without notice if the grounds are based on the conditions set forth under Article 121 of the Labour Law.
- End of service gratuity for both Limited and Unlimited contract are calculated as follows:
| Employee who has completed one year or more of continuous service:
· 21 days’ basic salary for each year of the first five years of service
· 30 calendar days’ basic pay for each additional year
Provided that the entire remuneration does not exceed two years’ pay.
However, in cases where the employee is terminated summarily for gross misconduct pursuant to the provisions of the UAE Labour Law, the employee is not entitled to end of service gratuity.
End of service gratuity computation will differ in the event the employee resigned:
(i) Under limiter term contract, the employee is not entitled if he resigns less than 5 years or service. If he has more that 5 years of service, gratuity is calculated as per above guidelines.
(ii) Under unlimited contract, he will be entitled base on the following calculations:
· One to three years of service: 1/3 reduction
· Three to Five years of service: 2/3 reduction
· More than Five years of service: no reduction
If you want to know your rights and learn more about how employment and incentive practices are implemented in UAE Labour Law, you can contact our team of expert labour lawyers in UAE and we will guide you through and pertinent legal advice will be provided.