Employment contracts mark the first step towards a successful work relationship between employers and their employees. They provide a clear legal framework, responsibilities, and rights of both parties and internal regulations of the company. In this article, the content of contracts of different types along with what to avoid in the UAE will be discussed in detail.
Types of Contracts
There are two major types of contracts in the UAE listed under legislation No. 8 of 1980 of the Labor Law. These types are the limited and unlimited contracts:
Limited Contracts
This type of contract includes a specific duration of employment agreed upon by the employer and employee. The time frame is usually three years but can vary. These contracts are used for limited-time projects or temporary employment.
Unlimited Contracts
As the name suggests, these contracts are for an unlimited period. They do not refer to a specific time frame and thus suit long-term employment and projects. Unlimited contracts are not feasible for private sector workers unless they work for the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM).
Content of Contracts
Each contract must include the basic information of the employer and employee which includes their full names, nationalities, contact details, and addresses.
The detailed job description must also be present in any contract. The title of the job along with all the tasks and responsibilities required of the employee need to be written and agreed on. This is necessary to create a clear framework of professional rights and duties.
The details of the salary including its value, frequency of payment, and bonuses should be stated in the contract along with overtime pay regulations.
The working hours, public holidays, annual leave, and sick leave rules must be present in any contract to avoid future confusion and misunderstandings.
In addition to that, the expiry date of the employment contract must be included in limited contracts, as well as the commencement date of employment in both limited and unlimited contracts.
Termination and Renewal of Contracts
There are several terms and conditions regarding the determination, expiration, and renewal of contracts.
In case the employer would like to terminate the contract with an employee, a notice period of 1 to 3 months should be given to the employee under the UAE labor law. In certain cases, the employer can terminate the contract without giving a notice under Article 44 of the UAE Labor Law.
After the employer notifies the employee of the termination, the employee gets one paid day off weekly to search for other job opportunities.
If the employee would like to terminate the employment contract with the employer, they must also give a notice period of 30 days that can reach up to three months depending on the profession. If the employee leaves the job without abiding by the rules of termination, they will have to pay a financial compensation worth 1.5 months of their salary.
Regarding the renewal of contracts, the employees and employers can agree on changing the date of expiry of employment as they see fit. Therefore, the renewal can happen in two ways. The employer and employee might either renew the contract as it was agreed-upon originally or they can extend the period of employment on the contract.
If the contract expires, and the employee or employer would not like to renew the contract, then the termination takes place naturally.
End-of-service benefits
If the employee has served the company for less than a year, they receive no end-of-service benefits.
If the employee has served the company for between 1 to 5 years, then they get a 21-day financial compensation for each year that they’ve worked in the company.
If the employee has worked for the company for more than five years service benefits are increased to a 30-day compensation for each year after the fifth year of employment.
Non-Compete Restrictions
Under Article 10 of the UAE labor law, a non-compete restriction clause is present to protect the employer. This means that the employee cannot work for similar companies after leaving a certain company.
Dispute Resolutions
To avoid complex problems between employees and employers, a clause about the mechanisms of any arising dispute can be mentioned in the contract. These mechanisms include mediation and arbitration.
What to Avoid in Contracts
Ambiguity
Employment contracts should be transparent, clear, and concise. Each clause must be detailed to avoid as much confusion as possible and protect the interests of the employee and employer alike.
Unlawful Clauses
The number one priority for any employment contract is making sure all its clauses fall under the UAE Labor Law. Discriminatory clauses targeting religion, race, or nationality are considered illegal.
Unilateral Changes
Unilateral changes must not be allowed in employment contracts; unilateral changes mean that the employer can single-handedly choose to modify the contract as he sees fit. This takes away from the rights and control of the employee. Any modification to the contract must be agreed upon by both parties, employee and employer.
For more guidance, please reach out to our team of experts in the UAE Labor Law.
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