Understanding the key changes Impact of the New Labor Law on Limited Contracts in the UAE

Under the new labour law for limited contract in UAE, applicable to all employers in the UAE (except those established in the Dubai International Financial Centre (“DIFC”), limited duration contracts have had a major impact on all business sectors in the country.

In this article, we are going to discuss aspects of the new labour law for limited contract in UAE. For instance, performance deadlines and what is limited contract in UAE. Here, you will learn, what is the benefits of limited contract in UAE, cancellation of limited contract in UAE, how can I resign with limited contract in UAE. Termination benefits for limited contract in UAE and rules for limited contract in UAE.

Rights and Obligations: Employee Perspectives under Limited Contracts

Dismissal provisions in the private sector is regulate by the Federal Decree and apply to both local and foreign workers. Under new labour law for limited contract in UAE, the termination of the employment contract is in the hands of the employer and the employee. In the case of a fixed-term employment contract, it expires automatically after a certain period of time, unless an extension is in place.

Also, UAE regulations require you to submit your resignation in writing. But when the time comes for you to leave the country, you must formally submit your resignation in writing. When requesting termination, it is important to provide a valid reason. If an employee attempts to resign at a critical time for the organization, the employer can stop the termination.

In addition, employees must give 30 days’ notice before officially leaving the job. The employment contract remains in effect throughout the notice period. Which means that; the contract will not expire as long as the employee continues to actively participate in the performance of his or her job duties. In addition, the employee will receive a regular salary for services rendered during the notice period.

Besides, if an employee decides to change jobs, he/she shall communicate this in writing by letter of resignation. The government must respond within one month. Formal acceptance of the resignation depends on the government’s decision and response within 30 days.

As well, if the employee does not receive any news about the consequences of his dismissal after one month. Nothing will happen and he will have to continue working.

Employer Responsibilities: Compliance with the Revised Regulations

Article 43(3) of the new labour law for limited contract in UAE Code contains a provision requiring the defaulting party to pay liquidated damages. Commonly referred to as “severance pay”. In the event of failure to comply with the stipulated notice period. Interestingly. These compensation orders are upheld even if the non-defaulting party’s absence does not cause significant prejudice to the non-defaulting party. The compensation is one month of the employee’s salary.

Also, according to Article 43, paragraph 5. Workers have specific rights if they are dismissing at the initiative of their employer. This means that they are entitle to one unpaid working day per week during their notice period for employment. However, it should be noted that this provision only applies if the employee notifies the employer of his intention to be absent three days in advance.

Contract Management: Renewal and Termination Procedures

If you wish to breaking a limited contract in UAE. You must first look for the details of the notice period in the contract. It is important to respect this notice period to avoid legal problems. Most companies will specify in the contract details that you must resign at least one month before your scheduled departure to comply with the notice period.

Also, the termination is considerate extinguished prior to the conclusion of the contract. Therefore, make sure you understand the termination rules. However, the entire notice period need not be observe and can be modify by mutual agreement.

In addition, if you decide to terminate your contract early, you may be required to pay a termination fee in accordance with your contractual obligations. This fee is usually equivalent to one month’s salary. This fee may vary depending on the specific policies established by the employer.

Legal Insights: Analyzing the Implications for Businesses and Employees in the UAE

Article 45 of the Labor Code establishes specific ways in which employees may resign without notice in certain cases. Firstly, when the employer does not comply with the conditions stipulated in the employment contract.

Second, if the employer intimidates the employee. Finally, it is a case when the employer unilaterally assigns another position to the employee without obtaining the employee’s consent.

As well, Article 35 of the new labour law for limited contract in UAE explains aspects of the notice period in cases where dismissal coincides with an employee’s leave of absence. If one of the parties wishes to enter into a contract in accordance with the law while the employee is on sick leave.

The agreed notice period specified in the contract shall come into effect only after the employee returns from sick leave. However, shall be change by mutual agreement between the parties.

Ensuring Compliance: Implementation Strategies for Employers and Employees

Enforcing contracts is fundamental to maintaining sound business relationships and protecting the interests of all parties involved. Some strategies and legal mechanisms that can be applied in the new labour law for limited contract in UAE are:

• Guaranty Contracts: Guaranty contracts are ancillary or subsidiary instruments that ensure the performance of another main contract. If the principal contract is not performed, the accessory contract is triggered. For a guarantee contract to be valid, the main contract must be possible, lawful and determined or determinable.
• Contract Compliance Audit: Reviews all documentation related to the contract, such as terms, conditions, payments and communications between the parties. Identifies opportunities for improvement in related processes and procedures.
• Legal Actions: If a breach occurs, the aggrieved party may resort to the Courts of Justice. It can demand the fulfillment of the obligations of the contract or the termination of the contract.

FAQs: Common Questions Answered about the New Labor Law for Limited Contracts in the UAE

What is a limited contract in the UAE?

According to the new labor law for limited contract in UAE A fixed term contract is a contract for a fixed period of time and normally depends on the duration of the UAE residency visa (e.g., 2 or 3 years depending on the location of the contractor). So, it will terminate automatically at the end of the term, unless terminated earlier by either party or extended by both parties.

What are the benefits of a limited contract in the UAE?

A limited contract in the United Arab Emirates (UAE) is an employment agreement that is valid for a specific period of time. Here are some key advantages and stipulations related to limited contracts:

• Flexibility for employers: Employers can hire employees for specific projects or temporary roles. It allows employers to effectively manage their workforce based on demand.
• Performance evaluation: Limited contracts allow employers to evaluate an employee’s performance, skills and fit with the organization for the duration of the contract.
• Intellectual property protection: These contracts help protect employers’ intellectual property and confidential information.
• Annual leave: Employees are entitled to annual leave with full pay, which varies depending on length of service.
• End-of-service benefits: Foreign workers with continuous service of one year or more are entitled to end-of-service benefits.
• Payment terms: Employers must pay the payments, salaries and other entitlements stipulated in the contract within 14 days from the date of termination of the contract.

How does the cancellation of a limited contract work in the UAE?

In the new labor law for limited contract in UAE, cancellation of a limited contract involves specific procedures and considerations. Let is delve into the details:

• Contract Expiration: When the term of the contract expires and is not extended or renewed.
• Mutual Agreement: If both the employer and the employee mutually agree in writing to terminate the contract.
• Notice Period: Either party may terminate the contract for a legitimate reason, provided that it complies with a notice period of 1 to 3 months.
• Other situations: Termination may also occur for reasons such as the death of the employer, death or permanent incapacity for work of the employee, court judgments, closure of the establishment, bankruptcy or non-compliance with the conditions of the work permit.
• Notice period: The party initiating the termination must notify the other party in writing. During the notice period the work agreed in the contract must be performed.

What are the termination benefits for a limited contract in the UAE?

When it comes to termination of a limited contract in the United Arab Emirates (UAE), there are specific benefits and indemnity provisions. Let us analyze them:

• Early termination indemnity: If an employer intends to terminate a limited contract before its end date, the employee is entitled to an early termination indemnity. The minimum indemnity is three months’ remuneration, including salary and allowances. If the remaining duration of the contract is less than three months, the indemnity covers the remaining duration.
• End-of-service benefits: For foreign workers with continuous service of one year or more, the UAE Labor Law provides for end-of-service benefits. These benefits are calculated based on the worker’s last salary and the length of service. The total compensation cannot exceed the salary earned for a period of three months or the remaining period of the contract, whichever is less.

What are the rules governing limited contracts in the UAE?

Let is explore the rules and regulations governing limited contracts in the new labor law for limited contract in UAE:

• Definition of limited contract. A limited contract is a type of employment agreement that is valid for a specific period of time. These contracts must not exceed 3 years and can be renewed for a similar or shorter duration if both parties agree.
• Work assignment. The worker must perform the work specified in the contract himself/herself and not subcontract it to any other entity.
• Non-compete clause. If the employee has access to the employer’s clients or trade secrets, the employee must not work on any competing project in the same industry for two years after the end of the contract.
• Working hours. Employees must work normal working hours, which are 8 hours a day or 48 hours a week.
• Workers’ rights. Workers are entitled to one day off with full pay on public holidays as defined by the UAE Cabinet. If working conditions require working on public holidays, the employer must provide another day off for each public holiday. Pay equivalent to normal working hours plus an additional 50% of the base salary.
• Payment terms. The employer must pay the payments, wages and other entitlements stipulated in the contract within 14 days from the date of termination of the contract.

Is there a probation period for employees under a limited contract in the UAE?

In the new labor law for limited contract in UAE, limited contract workers are subject to a probationary period. Here are the key details:

• Length of probationary period: Under UAE labor law, the probationary period for limited contract employees is a maximum of six months. This rule applies not only to limited contracts, but also to other types of contracts.
• Purpose of the probationary period: The main purpose of the probationary period is to evaluate an employee’s performance during the first few months of employment. Employers evaluate the employee’s suitability for the position and overall job performance.
• Dismissal during the probationary period: During the probationary period, the employer has the right to dismiss the employee without prior notice or end-of-service bonus. If the employer decides to terminate the contract, he must notify the employee in writing at least 14 days before the scheduled date.

How can I resign if I have a limited contract in the UAE?

If you are thinking of resigning from a limited contract in the United Arab Emirates (UAE), here are the legal steps you should follow:

• Advance notice: notify your employer of your intention to terminate the limited contract. Ideally, give notice at least 30 days prior to the intended date of resignation. The notice period should not be longer than 3 months.
• Comply with contractual obligations: Respect the terms and conditions specified in your contract regarding the notice period. Make sure that the length of the notice period is in line with what was agreed in the contract. The notice period is crucial for a smooth transition and to avoid any legal consequences.
• Legal resignation procedure: Notify your company in writing of your intention to resign. The notice must be sent at least 30 days before the intended date of resignation. Respect the notice period specified in your contract. Make sure both parties adhere to the terms and conditions.

What are the procedures for breaking a limited contract in the UAE?

When it comes to breaking a limited contract in the United Arab Emirates (UAE), the new labor law for limited contract in UAE are specific procedures and considerations to follow:

• Notice period: UAE labor law provides that either party to the employment contract may terminate it for any legitimate reason. The terminating party must give between 1 month (30 days) and 3 months (90 days) notice.
• During the notice period: The work agreed in the contract must be performed. The employee is entitled to the full salary according to the contract. If the notice period is not complied with, the party terminating the contract must pay the other party a “notice period” indemnity, calculated on the basis of the employee’s last salary. If the employer terminates the contract, the employee may take unpaid leave of one day per week to look for another job.
• Grounds for termination: Limited-term contracts may be terminated for various reasons, including the following: Expiration of the term of the contract. Mutual agreement between employer and employee. Force majeure (exceptional circumstances). Liquidation of the company.
• Arbitrary dismissal: It would be considered arbitrary dismissal if the employer dismisses an employee because the employee has filed a legitimate complaint with the Ministry of Human Resources and Emiratization or suing the employer.

How is gratuity calculated under a limited contract in the UAE?

In UAE, the gratuity consists of a lump sum payment to an employee by the company at the end of their of service. It is calculated based on:

• specific rules
• the type of contract (limited or unlimited)
• the method of leaving the job.

Here is how gratuity under limited contract in UAE is calculated for limited contracts:

• Years of service: 1 to 5 years:
• Amount of gratuity = (base salary × 21 days × years of service) / 30.
• Years of service: More than 5 years:
• Bonus amount = (base salary × 30 days × years of service) / 30.

For example, if you have worked for a company for 3 years with a base salary of AED 20,000, the calculation of your bonus would be as follows:

• • For the first 5 years: (20,000 × 21 × 3) / 30 = 21,000 AED
  • Total bonus: 21,000 AED

Remember that these calculations are based on the UAE Labor Law. So, it is essential that you know your rights and benefits during termination. If you need a more accurate estimate, consider using an online gratuity calculator by entering your specifics.

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