Employment Contracts in United Arab Emirates

1. Minimum requirements

Employees based ‘onshore’ in the UAE (i.e. not it a free zone) are required to enter into a prescribed form, dual-language employment contract that is registered with the Ministry of Labour. It deals with basic entitlements such as salary and allowances and holiday, and specifies whether the employment is for a fixed or unlimited term. This forms the operative employment contract for UAE law purposes, although most employers require employees to enter into an additional, company-form employment contract. This often resembles employment contracts used in other jurisdictions, and can contain additional provisions (such as confidentiality and post-termination restrictions) that are enforceable against an employee as long as they do not conflict with other provisions in the Ministry of Labour employment contract that are of more benefit to the employee.

Other free zones (such as the Jebel Ali and Dubai Airport free zones) have specific dual-language employment contracts similar to the Ministry of Labour Contract that employers are required to enter into and submit to the relevant free zone authority as part of the visa sponsorship and labour authorization regimes for expatriate employees in the UAE.

Employers in the DIFC need not enter into a prescribed form employment contact, but must submit a written employment contract to the DIFC Authority for every employee. The written employment contract must cover a range of minimum information, including wages, date of commencement of employment, holiday leave and pay and whether the employment is for a fixed or unlimited term.

As a general rule, both the UAE Labour Law and the DIFC Employment Law set out a set of minimum employment entitlements and standards which can be exceeded to the employee’s benefit by agreement between the parties, but cannot be reduced or excluded to the employee’s disadvantage.

2. Fixed/unlimited terms

Contracts may be for either fixed or unlimited terms. The maximum duration for an unlimited term contract is 4 years, after which the employment is automatically converted into an unlimited term contract with minimum notice provisions. Generally speaking, it is not possible to have hybrid contracts, featuring a fixed term but with notice of termination provisions. Such contracts will generally be deemed to be for a fixed-term.

If an employer terminates a fixed term contract ahead of the end of the specified termination date, they are obliged to pay compensation to the employee equivalent to 3 months’ remuneration, or for the remainder of the term of the contract, whichever is the lesser amount.

Contracts in the DIFC may be for fixed or unlimited terms.

3. Notice period

The minimum notice period for an unlimited term contract (outside of the DIFC) is 30 days. An initial probation period for a maximum of six months can be imposed by the employer, during which the employer may terminate employment without notice or payment in lieu of notice, severance pay or liability for arbitrary dismissal. In the DIFC there are minimum notice periods based upon length of service, but these can be replaced by alternative provisions by agreement between the parties.

For more information, please contact L&E Global.
This information was contributed by Clyde & Co.
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