An employee may be recruited on a fixed-term employment contract for up to three years following Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector or the "UAE Labour Law" (which became effective on February 2 2022). The term may be extended or renewed for a similar or lesser period. Suppose the parties continue to fulfil their responsibilities under the contract after it expires without being renewed or extended. The agreement is deemed renewed under the same terms and circumstances as the original agreement.
Any extension or renewal of the employment contract's terms will be considered when determining an employee's end-of-service benefits. The legislation also mandates that unlimited employment contracts must be changed into fixed-term employment contracts following this decree-law within a year of the contract's effective date and may be extended by the Cabinet for further periods as needed in the public interest. Meanwhile, this decree legislation's requirements shall also apply to unlimited employment contracts signed in line with Federal Law No. 8 of 1980.
What is the Labour Law in the UAE?
Federal Decree-Law No. 33 of 2021, often known as the "New Labour Law," became effective in the UAE on February 2, 2022, replacing Federal Law No. 8 of 1980, which governed employee relations in the private sector.
Consequently, employers operating in the UAE are now required under the new Law to take the appropriate actions to guarantee compliance with the new or updated regulations. The new Law's enactment intends to address the demands and difficulties of the labour market, which has considerably changed over the last several years. The new Law also demonstrates the UAE government's commitment to implementing a legislative and regulatory framework compliant with international standards.
The goals of the New Labour Law in the UAE are as follows:
- Ensuring the efficacy of the labour market in the United Arab Emirates by assisting in the recruitment and retention of future skills and talents and by offering employers a desirable business environment to enable both parties to contribute to the achievement of the national development goals of the UAE;
- Establishing the rights and responsibilities of the parties to this legal connection fairly and regulating employment arrangements;
- Increasing the flexibility and sustainability of the labour market in the UAE by protecting the parties to an employment relationship, its developments, and any unusual situations that could arise and have an impact on that connection;
- Enhancing the talents and skills of employees in the private sector in a way that increases the workforce's effectiveness and productivity in the UAE labour market; and
- Giving both parties employment relationship protection and allowing them to exercise their rights within the framework of this Law.
Scope of Application of New Labour Law in the UAE
- The provisions hereof shall apply to all establishments, employers and workers in the UAE private sector.
- The following categories shall not be subject to the provisions hereof:
- Employees of federal and local government entities;
- Employees of the armed forces, police and security; and
- Domestic workers.
What is a Fixed term Contract?
According to the New Labour Law, employment contracts with unlimited terms are no longer acceptable, while limited-term agreements are now restricted to three years. Employers must convert their current unlimited contractual agreements to restricted ones within a year of the Law's enactment. Additionally, companies can choose not to renew the employee's contract without incurring extra end-of-service fees.
Limited employment contracts provide several benefits, like enabling employers to evaluate workers' contributions and value to the organization before joining a contractual contract or employing subject matter experts for a particular job. The new Law, however, is anticipated to aid in improving employee retention by forcing companies to provide extra incentives, such as bonuses and benefits and a better work environment, to entice eligible candidates.
You may want to know: The UAE New Labour Law
Termination Notice of Fixed term Contract
As per Article 43 of the New Labour Law, fixed-term contracts may be terminated early for a "legitimate reason" as long as the required notice period—which must be in writing and at least 30 days but may not exceed 90 days—is given. Since the word "legitimate reason" is not defined, it is unclear how the Labour Courts would determine what grounds for dismissal are acceptable.
Further, it states that the party terminating the contract must provide the other party remuneration equivalent to the amount of the employee's wage for the notice period if the employee refuses to serve the notice period or the employer does not want them to (or remaining part thereof). An employee is entitled to one day of unpaid leave every week after the employer cancels the contract to look for other employment.
Labour and employment are one of the main aspects of the country. It is also where some issues in the UAE arise from. HHS Lawyers & Legal Consultants in Dubai can assist you with any problems you may have with your employee or employer. Our experience and quality service can ensure that. We can provide you with the information you need to understand your situation more. In addition, we will surround you with the people that you need.
Please discuss with us the legal matters you need to consult by booking a free consultation with one of our lawyers in Dubai.