What is Limited Contract in UAE Means?

Most people who are employed in the UAE are under two main types of contracts; limited contracts and unlimited contracts. Some people just sign the contracts without really understanding the provisions. This post tries to break down the details limited contract and all that you should know.

Limited Contract of Employment

As the name implies, the limited contract has some limitation and is will expire at some point. The contract is signed between an employer and employee and has a fixed period of time. When the contract expires, it is not mandatory for it to be renewed. The employee is bound by the contract to work up to the expiry date of the contract, and then they may opt to find employment elsewhere or sign a new contract.

Why Companies Use Limited Contracts

Most of the companies that deal with various projects will have some timelines that they need to complete the projects, for instance 2 years. With this in mind, a limited contract is ideal for the specific project rather than having permanent employees on the payroll. During the contract period, companies are also able to gauge the performance of the employees. This will help them in making the decision on whether they should renew the contracts for the employees or not. This makes the burden of termination admissible.

What Limited Contracts Mean for Employees

Before an employee appends his/her signature on any contract, they should read through carefully so as to determine the type of contract they are agreeing to. The contract can be limited or unlimited, and establishing this is essential so as to fully understand their rights and the provisions of the contract.

Resignation in Limited Contracts

In most cases, there will be exit clauses that are added into the contract. You can choose to resign from the employment under the limited contract, before it expires. When this happens, there are various things that may follow. For instance, your employer may impose a 12 month ban and the UAE Labour Law provisions will require you to pay your employer half compensation for 3 months due to the premature termination of the contract.

Can a Company Terminate A Limited Contract?

A company may opt to terminate a limited contract before the contract period is over. When this happens, the law requires that the company pays the employee compensation for the remaining contract period, or at least 3 months’ compensation.

Notice Provisions in Limited Contract

Limited contracts may differ from one company to another and as such the provisions of the notice required may not be standard. It is important to agree with your employer on the notice period, in the event of resignation on your part or termination of the contract by the employer, before the expiry date.

Are there service Benefits under Limited Contracts?

You should receive benefits in the form of gratuity once you have worked for 12 months under a limited contract.