UAE employment contracts : limited VS unlimited

Under UAE labour rules, employment contracts have historically fallen into two broad categories : fixed term (limited) and openended (unlimited). Each structure carries practical consequences for duration, termination, notice, and end of service gratuity. This guide compares the core features to help HR select the right format and manage risk.

Limited (fixedterm) contracts : definition and use cases

A limited contract runs for a specified term, often aligned to the residence visa period (e.g., two or three years depending on employer location). It ends automatically on the expiry date unless renewed by agreement or terminated early. Limited contracts suit project based roles where the timeframe is known upfront.

Early termination and compensation (limited)

As a rule, limited contracts end on the specified date. If the employer terminates early, the employee is generally entitled to a minimum of three months’ total remuneration (salary and allowances), or the remainder of the term if shorter. If the employee resigns before the end date (absent legal grounds), they may owe compensation equal to half of three months’ remuneration, or half of the pay for the residual term if less than three months.

Unlimited (openended) contracts

The permanent employment contract (CDI) as we know it in France no longer exists in the United Arab Emirates following the major labor law reform introduced by Federal Law No. 33 of 2021, which came into effect on February 2, 2022.

End of service gratuity : general principles

After at least one year of continuous service, gratuity is typically calculated at 21 days’ basic pay per year for the first five years, and 30 days’ basic pay per year thereafter, subject to a cap of two years’ total remuneration. In cases of proven gross misconduct, gratuity may be forfeited.

Minimum contract content

At a minimum, contracts should specify the date of conclusion, commencement date, job description, workplace, remuneration, and for limited contracts, the duration. Clear drafting supports compliance and operational clarity.

Good practice

• Select the format that matches the business need (timebound project vs ongoing role).
• Set unambiguous notice provisions and compliant termination grounds.
• Align job titles with the establishment’s licensed activities.
• Anticipate gratuity calculations and exclusions.
• Keep templates up to date with legal developments.

Properly drafting the employment contract, understanding the rules governing termination, and formalizing the essential clauses help reduce the risk of disputes and ensure that HR practices are aligned with the applicable labor laws.

Our lawyers, who are experts in labour law, are available to answer all your questions and provide advice. We offer face-to-face meetings or videoconferencing. You can make an appointment directly online at https://www.agn-avocats.fr/.

AGN AVOCATS – Labour Law
contact@agn-avocats.fr
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