Which Employment Contract In The UAE Is Most Suitable? Limited Contract Or Unlimited Contract?

23rd September 2017

In the UAE, there are two types of Employment Contract - Limited and Unlimited. These are registered with the Ministry of Human Resources and Emiratization (MOHRE) when applying for an employee's visa. They confirm the terms of the employee's engagement, such as their designation, basic salary and any allowances, probation period and number of days off per week etc.

What is the difference between a Limited Contract and an Unlimited Contract?

A Limited Contract

A limited contract is a fixed-term contract usually linked to the duration of the residency visa (2yrs). It automatically terminates at the end of the term unless agreed by both parties to renew. If the employer wishes to terminate early there is a compensation penalty equivalent to three months salary or the remaining amount of the term if it is less than three months. If the employee terminates early there is a compensation penalty of 1/2 of three months salary or 1/2 of the remaining term if it is less than three months. End of service gratuity is applicable providing the employee has completed more than one year. However, if the employee terminates the contract they are not entitled to gratuity unless they have completed five years service.

An Unlimited Contract

An unlimited contract is the most common because it is the most flexible. It is an open-ended contract. The notice period is usually 30 days unless both parties agree a longer notice period. End of service gratuity is applicable providing the employee has completed more than one year. However, if the employee terminates, the gratuity is reduced by 2/3 if they have completed between 1-3 years and by 1/3 if they have completed between 3-5 years. There is no reduction if they have completed five years service or more.