19 August

Differences between limited and unlimited contracts

Posted by jalal

Employees shall be fully aware when they seek to start their profession or change their job from place to another that they shall sign documents such as: offer letter and employment contract. It is of utmost importance to understand and comprehend what such documents mean. Therefore, UAE`s Federal law No. 8 of 1980 stated that are two permissible types of employment contracts: Limited employment contracts which are contracts for a specified duration with specific commencement and completion dates, and unlimited contracts by which the employee will continue to work for the employer from a specific date till such time as the employment contract is terminated by either party after giving prior notice.

In the event that the employment contract is unlimited one, the article 117 of the UAE `s labour law stated that:

1. Either the employer or the worker may terminate an indefinite term contract for a valid reason at any time following its conclusion, by giving the other party a notice in writing at least 30 days prior to termination.
For the daily-paid workers, the notice period shall be as follows:

One week: if the worker has been employed for more than six months but less than one year.
Two weeks: if the worker has been employed for not less than one year.
One month: if the worker has been employed for not less than five years.

Moreover, in case the employment contract is unlimited, the article 115 of the UAE`s Federal law stipulated that: Where an employment contract is for a definite term and the employer revokes it for reasons other than those specified in Article (120) he shall be required to compensate the worker for any damage the latter sustains, provided that the amount of compensation shall in no case exceed the aggregate wage due for a period of three months or the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract. And in accordance with the article 116: Where a contract is revoked by the worker for reasons other than those specified in Article (121), he shall be required to compensate the employer for any damage the latter sustains as a result, provided that the amount of compensation shall not exceed half a month wage for three months or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract.