Understand the key elements of employment contracts in United Arab Emirates
In the United Arab Emirates (UAE) labor market, two main types of employment contracts are utilized as outlined in UAE Labor Law No. 8 of 1980: Limited Term Contracts and Unlimited Term Contracts. Each of these categories has distinct characteristics that influence factors such as termination clauses and end-of-service gratuity.
Limited Term Contracts, also known as fixed-term contracts, establish a predetermined duration for employment. This timeframe is mutually agreed upon by both the employer and the employee. These contracts are typically used for specific projects or one-time jobs.
In accordance with recent reforms implemented in 2018, the maximum permissible duration for a Limited Term Contract is two years.
Unlimited Term Contracts, often referred to as open-ended contracts, specify a start date for employment but lack a designated end date. This implies the employment relationship can continue indefinitely unless terminated by either party following the legal guidelines set forth in UAE Labor Law.
A well-drafted employment agreement in the UAE serves as a cornerstone for a smooth working relationship between employer and employee. Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector outlines the minimum contractual requirements, but additional clauses can be included to enhance clarity and address specific needs.
This section identifies the employer and the employee by their full legal names and details.
Specify whether the agreement is a Limited Term Contract (fixed term) or an Unlimited Term Contract (open ended) as defined by UAE Labor Law. For Limited Term Contracts, the start and end date of employment should be clearly stated.
Clearly outline the employee's job title and a detailed description of their duties and responsibilities.
Specify the employee's basic salary, along with any allowances, bonuses, and their frequency of payment. Additionally, detail any benefits offered, such as health insurance, vacation entitlements, and sick leave, ensuring compliance with UAE Labour Law's minimum requirements.
Define the standard working hours per week and overtime pay calculations, adhering to UAE Labour Law regulations.
Outline the grounds and notice periods for contract termination by both employer and employee, as stipulated by UAE Labour Law.
If applicable, include clauses protecting the employer's confidential information and intellectual property rights.
Establish the process for resolving any disagreements arising from the employment contract, such as mediation or arbitration.
The UAE labor market incorporates a mandatory probationary period within most employment agreements. This initial period serves as a trial phase for both the employer and the employee to assess suitability and ensure a good fit. Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector (the "UAE Labour Law") governs the parameters of the probationary period.
Confidentiality and non-compete clauses are often included in UAE employment agreements to protect the employer's legitimate business interests. These clauses are subject to specific regulations outlined in the UAE Labour Law.
Confidentiality clauses are designed to safeguard the employer's confidential information, such as trade secrets, client lists, and business strategies. The UAE Labour Law, specifically Article 16, emphasizes the employee's obligation to preserve the confidentiality of work-related information.
These clauses should clearly define what constitutes confidential information and the restrictions placed on employee disclosure during and after their employment.
Non-compete clauses restrict an employee's ability to work for a competitor or engage in similar activities for a specific period after leaving the company. However, UAE law imposes limitations on the enforceability of non-compete clauses:
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