It is therefore extremely important for both employers and employees to understand of the employment contracts. The amendments of the UAE Labour Law implemented by the year 2024 have introduced new changes to the format and rules governing limited and unlimited contracts. This blog will be a guide on these new developments with a view of enabling you to understand the new environment.
Limited Contracts:
Definition and Duration: Limited contracts are more formalized and cover the duration of the employment of the employee in an organization. Normally they take between one and three years, although there are shorter term contracts of a few months. The updates for 2024 in this area have brought more stringent rules so that such agreements are comprehensible and non-prejudiced.
Termination Conditions: Depending on the new law, it is now compulsory for an employer to offer a genuine cause for discharge of a worker under limited contract before the contract expires. Others are cases of egregious behavior, poor performance over time, or poor performance caused by cyclical recessionary effects on the business. Suppose an employer breaches a contract by ending a contract of employment without reasonable and proper cause. In that case, the employee is entitled to be paid wages for the rest of the term of the contract or up to three months wages whichever is less.
Renewal and Non-Renewal: The limited contract between the employers and employees can be renewed again by mutual agreement by the parties involved. The new regulations have asked for clear information about the renewal terms in the original contract. If either of the parties does not wish to continue with the contract, they must give one month’s notice in advance of the date of contract expiration.
Unlimited Contracts:
Definition and Flexibility: As seen earlier, this type of contract is open-ended and therefore has a relatively more flexible term than fixed contracts. They can, however, be terminated by either the employer or the employee after a given notice period has been given.
Notice Period and Termination: The 2024 changes require the parties to provide a notice period of at least thirty days in case of terminating the unlimited contract. The period can be extended depending on the number of years the employee has served in the company; the maximum period allowed is ninety days if the employee has served the company for not less than five years. The employers have to offer a proper cause for dismissal just like the cases of limited contracts. The employees are also expected to tender their notice if they intend to leave the company to provide an easy time finding a replacement.
Compensation and Benefits: Employees under unlimited contracts are entitled to benefits for the end of service, and this is given depending on the duration the employee has served. The new law defines that the aforementioned benefits are available to employees who have served for a year or more.
- 21 basic paydays for each completed year of service in the first five years.
- 30 days basic pay for each completed year of service over 5 years.
For Employers: The changes to the regulations mean that employers have to go over their contracts and possibly change them. The use of memos is helpful to provide understanding and avoid people disputes. There should also be sensitization of the HR professionals and managers who implement the changes in the companies.
For Employees: People should attempt to read through all the new regulations just to know what their rights and responsibilities are. Understanding the differences between limited and unlimited contracts is useful for the employee to make the right decision for their employment. Employees also have to keep employment agreements as well as any letters to and from the employers regarding all the pre-termination alterations or termination of the employment contract.
Conclusion: The changes that have been made to the UAE Labour Law in 2024 have brought many novelties to the employment contracts which in their turn were aimed at providing significantly more accurate expectations of the relations between the employer and the employee. Understanding these changes will help you to be armed with the right information for new changes that come with it. Tune in as we will come with the continuation to the blog next week where we will be discussing the new regulations on working hours and overtime.