What is Limited Contract In UAE? An Ultimate Guide 2024

If you are wondering about limited contract in UAE and need to know more details or are considering a job opportunity under this agreement, you should do an in-depth research to get the complete answers to your questions so you can easily make an informed decision.

In this article, you will find a complete guide on what is limited contract in UAE, what benefits you get, what its legal bases are, how a limited contract termination is executed and what obligations you should follow.

What Is Limited Contracts In UAE?

A limited contract in the UAE is a fixed-term employment agreement lasting up to three years. It is usually used for temporary or project-based work. Limited contracts are usually linked to the duration of the UAE residency visa, which is either two or three years depending on the location of the employer.

As well, they automatically terminate at the end of their term unless renewed or terminated earlier by both parties. A limited contract is valid for a specified period of time, not to exceed 3 years. Limited contracts are usually used for temporary or project-based work.

Benefits Of Limited Contract In UAE

The advantages of limited contract in UAE are:

Limited contracts offer employers the flexibility to hire and fire employees as needed.
Also, they allow employers to hire workers for specific projects or temporary roles without committing to long-term employment.
Besides, limited contract employees have the opportunity to try out a new job or company before committing to a longer-term contract.
This trial period helps both parties assess compatibility and suitability.
Limited contracts can help protect the employer’s intellectual property and confidential information.
By specifying the length of the contract, employers can ensure that employees do not misuse confidential data after the contract ends.

For Employers

Employers have a number of benefits when working with limited contract in UAE hires, some of which include:

Flexibility to hire employees for specific projects or temporary functions.
The flexibility to hire workers on a fixed-term basis, adjusting to project deadlines or business needs.
Effectively manage their workforce based on demand.
Employers can evaluate the employee’s performance, skills and fit with the organization over the duration of the contract.
Employers can control costs by hiring staff only for the time needed.
By specifying the duration of the contract, employers safeguard their intellectual property and confidential information.
Employers can comply with regulations regarding notice periods, early termination and end-of-service benefits.

For Employees

Like employers, employees also gain benefits from limited contract in UAE, such as:

They provide a sense of job security during that period.
Employees can focus on their duties without worrying about sudden terminations.
Knowing the end date of the contract allows better planning for future employment.
Specific work experience related to the project, which can enhance their skills and knowledge.
Assess workplace culture, team dynamics and job satisfaction.
Maintain a healthy work-life balance by knowing when your work commitments end.

Important Things To Consider In Limited Contract

There are a number of factors to consider when agreeing to work under the terms of a limited contract in UAE. That is why, some of them are:

Compensation and benefits: Detail salary, bonuses and any other compensation components. Include information on benefits such as health insurance, retirement plans and other benefits.
Leave and leave policy: Address sick days, vacation and other time-off policies. Clearly state the rules for taking time off and any accrued vacation entitlements.
Employee classification: Specify whether the employee is full-time, part-time or contract. Clarify their employment status and associated benefits.
Hours and period of employment: Define the work schedule, including regular hours and any flexibility.
Confidentiality and privacy: Include confidentiality provisions, especially if the employee will have access to sensitive information. Address privacy and data protection issues.
Termination and severance: Clearly describe the terms of termination. Include details on severance pay or benefits upon termination.

Essential Components

The most important factors in a limited contract are:

Clearly identify the employer (company or individual) and the worker (contracting party).
Include their full legal names, addresses and relevant contact details.
Specify the start and end date of the contract.
Limited contracts usually have a fixed term (1 year, 2 years).
If applicable, mention renewal clauses.
Define the employee’s role, position and duties.
Include details on working hours, location and any specific requirements.

Renewal Process And Implications

The Renewal Process is about when the limited contract is approaching its expiration date, both the employer and the employee need to discuss renewal. That means, if both parties agree to continue the employment relationship, they can sign a new contract.

Also, the renewal process involves:

Reviewing the terms of the existing contract.
Negotiating any changes (such as salary adjustments or fringe benefits).
Drafting and signing the renewed contract.
If the employer decides not to renew the contract, it must pay the employee end-of-service benefits under UAE labor law.

As well, these fees include gratuity based on years of service.

Non-Compete Clauses

Is a written restrictive provision that include in an employment contract UAE or an ancillary agreement. Under this clause, the employee agrees to refrain from engaging in any activity that directly competes with that of the employer for a limited period of time.

Also, a non-competition clause prohibits an employee from:

Working for competitors of his former employer.
Engaging in any business activity with customers of his or her former employer.
Soliciting co-workers currently working for his or her former employer.

The limited contract in UAE must specify any restrictions on the employee’s ability to work for competitors during or after employment.

New Labor Law For Limited Contract In UAE

In addition to full-time employment, the new law introduces several work models:

Allows working for one or more employers for specific hours or days.
It consists of performing a job with a fixed duration or for a specific task.
It allows working remotely, partially or totally.
The Executive Regulations of the Act now include 12 types of work permits, reflecting various sponsorship and employment arrangements.
Employment contracts of unlimited duration are no longer valid under the new law.
Contracts of limited duration cannot exceed a period of three years.
Employers must modify existing unlimited contracts in UAE into limited contracts within one year of the enactment of the law 12.
The law grants new types of leave and addresses issues related to harassment, bullying, physical violence and psychological abuse against employees.

See More: Unemployment Insurance UAE: A Comprehensive Guide for 2024

What is the notice period for limited contract in UAE?

The notice period for limited contract in UAE employees is usually 30 days. If you intend to leave your current job, it is essential that you prepare in advance. Be sure to give your company advance notice so that you can complete the notice period and make a smooth transition to your new position.

As well, during the notice period:

The work agree upon in the contract must be performance.
The employee is entitled to his or her full salary.
If the notice period is not complied with, the defaulting party must pay the other party a notice indemnity.
The indemnity is calculated on the basis of the employee’s last salary.
If the employer terminates the contract, the employee is entitled to unpaid leave of one day a week during the notice period to seek other employment.

Termination of Limited Contracts

Either party can terminate the limited contract in UAE before its end date. However, there are some rules that you must follow according to the UAE Labor Law.

Also, in the event that the employee wants to terminate the contract early, he/she must pay an “early termination indemnity”, consisting of:

An amount equal to half of three months’ remuneration: salary and allowances.
Half of the remuneration for the remaining period if it is less than 3 months.

This is in accordance with the rules relating to the limited contact rule on termination in the UAE.

As well, if the early termination of the limited duration contract in the UAE by the employer, the employer will have to:

Pay an “early termination indemnity” to the employee for a minimum of 3 months’ pay: salary and indemnities.
Pay him an amount equivalent to the remaining duration of the contract in case this period is less than 3 months.

Final Thoughts

If you know the advantages and conditions of limited contract in UAE, you will be able to make informed decisions and find more job opportunities in the UAE with one of the leading staff outsourcing agency in UAE.

if you have questions about MOHRE limited contract or limited contract resignation UAE, you can find more information on the MOHRE website.

On the other hand, if you want how to know if your contract is limited or unlimited in UAE and more information of your interest you can visit our website now or contact us.