Things to Know About Employment Contracts in the UAE
HLB UAE Payroll Team
An employment Contract is an agreement between an employer and an employee that contains fundamental working terms such as the employee’s designation, the commencement date of employment, remuneration, and the contract’s duration. The employment contract should be drafted in two versions, one for the employer and one for the employee, and both should be signed.
A worker may be hired under a fixed-term employment contract for up to three years under Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector. The term could be extended or renewed for a shorter time frame. Labour Contract in UAE ensures a flexible working environment.
Three-year Fixed-term contracts
All workers must sign fixed-term employment agreements that last up to three years. Upon expiration of the term, the employment contract can be renewed or extended (multiple times).
When the contract is not renewed or extended, but the parties continue to operate as if the contract is still in effect, then the contract is deemed renewed under the most recent terms and conditions. Every extension or renewal will automatically count toward an employee’s total years on the job for end-of-service gratuity).
Types of Work Arrangements
In addition to full-time employment, the new Labour Contract UAE also introduces the following working models:
Working a certain number of hours or days for one or more employers on a part-time basis.
Tasks must be completed within a set time frame.
Conducting some or all of your work remotely.
More importantly, the new Law’s adoption has given employers more ways to meet their hiring needs. Moreover, it will provide flexibility to workers who prefer non-traditional working arrangements.
Even though the term “fixed” is used, the new legislation stipulates that fixed-term contracts may be terminated on notice at any time during the term for a “legitimate reason,” under the employment contract is given (minimum of 30 days, maximum 90 days).
Employers and employees are required to pay equal compensation if they do not serve the notice period, or if they choose not to serve it. Upon termination of employment, an employee is entitled to one day of unpaid leave per week to look for a new job.
- It is now acceptable to terminate an employee with notice for reasons other than those relating to performance or behaviour: The concept of redundancy is now expressly recognized as a legitimate reason for termination if the employer is bankrupt or insolvent, or if there are any economic or exceptional reasons. In addition, it is permissible to terminate an employee’s employment if the business closes or when their work permit expires.
- There have been some notable additions to the existing legislation that mirror the grounds for immediate dismissal: Abusing one’s position for personal or financial gain, or working for another employer without adhering to the company’s policies.
- A new set of grounds has been added for an employee to leave immediately and without notice: *In cases where a danger exists at work that threatens an employee’s health or safety, provided the employer knows about the risk and does not take action to eliminate it.*Work assigned to an employee that is not in line with their job description (without their consent).
Employers are allowed to impose non-compete clauses in employment contracts under Article 10 of the UAE Labour Law. These limitations must be defined in terms of time, place, and the nature of the work to protect the business’s legitimate interests. Upon expiration of an employment contract, the maximum restrictive period is two years.
Reviewing contracts, employee handbooks, and any other employment policies and procedures is crucial for all UAE businesses (both onshore and in the free zones) to ensure compliance with the New Law. We are proud and happy as we work together to ensure your compliance.
How HLB HAMT service work different from others
The core of the business at HLB HAMT is technology, and the company strives to pursue and provide high-quality audit and advisory services. Contact HLB HAMT consultancy for a thorough consultation on the employment laws in the UAE. We are happy to answer all your questions about resident visas, labor laws, and probation period rules in UAE.
HLB HAMT will continue to monitor the requirements of the upcoming legislation to keep our community updated on any new developments or recommendations.
HLB HAMT can help you and your company create policies, procedures, a risk-based obligation register, and training to make sure that the new Law’s requirements are met.
Trust HLB HAMT, one of the top payroll outsourcing companies in the UAE, to expedite and accurately complete your payroll. We have a distinguished history of outsourcing the best payroll method from the UAE to other nations.
Frequently Asked Questions
What is the new UAE Employment Contract Law?
The new UAE labor law prohibits unlimited contracts. Instead, an employment contract is only considered valid if it is less than three years old. It is possible to extend or renew a contract after it expires.
What is the purpose behind the new employment contract law?
The new Law’s adoption has given employers more ways to meet their hiring needs. Moreover, it will provide flexibility to workers who prefer non-traditional working arrangements.
What are the working models introduced by the new law?
In addition to full-time employment, the new Labour Contract UAE also introduces Part-time, Temporary, and Flexible working models.
What are Non-compete restrictions in employment contracts?
A non-competition restriction (or non-compete clause) restricts an employee from joining another organization for a defined period after termination.
Will there be a termination in fixed-term contracts?
The new legislation specifies that fixed-term contracts may be terminated with notice for a “legitimate reason (minimum of 30 days, maximum 90 days).
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