Download Employment Contracts in the UAE

The United Arab Emirates (UAE) has a reputation for having employee-friendly labour rules. In the United Arab Emirates, the relationship between an employer and an employee is regulated by Federal Law No. 8 of 1980 on Labour Relations (UAE Labour Law).The UAE Ministry of Human Resources and Emiratisation (formerly the Ministry of Labour and Social Affairs) has formed a labour department in each of the UAE's emirates to facilitate dispute resolution and other labour-related issues (Labour Department). Employees in the public sector, domestic workers in families, and employees in some free zones in the UAE with their own employment laws (for example, the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Markets (ADGM)) are exempt from the UAE Labour Law.

Types of Employment Agreement in UAE

The UAE Labour Law has been updated on a regular basis to meet the changing needs of the labour market. Employers and workers in the UAE may enter into two forms of employment contracts:

  1. Limited Term Contracts and
  2. Unlimited Term Contracts, according to the UAE Labour Law.

This article examines some of the distinguishing characteristics of these two forms of work contracts.

Types of Employment Agreement in UAE

Limited Term Contracts

A limited term contract is a fixed-term contract that is usually related to the length of time that the UAE resident visa is valid (i.e. two or three years, depending on the location of the employer). Unless one party terminates it sooner or both parties renew it, it will automatically expire at the end of the term.

Contract Period

A fixed term contract will last no more than two (2) years.

Renewal and Expiration

A limited-term contract is deemed to be automatically extended from the date of expiry for an additional term equal to the original term of the contract unless the employer or the employee has given the other party written notice (at least one (1) month prior to the date of expiry) of its intention not to renew the contract.

Termination

A limited-term contract may be terminated in one of the following ways before it expires:

  • Termination by the employer for his or her own convenience

An employer may end a limited-term contract by awarding an early termination bonus to the employee. In this case, the early termination bonus should be equal to the lower of the employee's remuneration (including standard wages and allowances) for the following periods:

  1. three (3) months; or
  2. the remainder of the contract term.

A limited-term contract may also be terminated by an employer for a legitimate reason (for example, an employee's failure to perform after repeated warnings) by providing adequate notice.(a minimum of one (1) month and a maximum of three (3) months) to the employee in compliance with the employment contract's terms.

  • Employee termination for convenience

An employee may terminate a limited-term contract by paying an early termination fee to the employer. In this case, the early termination bonus should be equal to half of the employee's monthly remuneration (including standard wages and allowances) for either:

  1. three (3) months; or
  2. the remainder of the contract's duration.
  • Employer termination for gross misconduct

If the conditions set out in Article 120 of the UAE Labour Law apply, an employer may terminate a limited term contract without providing any notice or paying any termination fee (including end of service gratuity). Article 120 of the UAE Labour Law specifies the following situations:

  1. if the employee commits a mistake that causes the employer substantial material loss;
  2. if the employee disobeys safety instructions at work;
  3. if the employee reveals confidential information of the employer; or
  4. if the employee is convicted of a crime against honour, honesty, or public opinion.
  • Employee termination for gross misconduct

If any of the conditions mentioned in Article 121 of the UAE Labour Law apply, an employee may terminate a fixed term contract without providing notice or paying any termination compensation. The employee is attacked by the employer or the employer's legal representative in the situations set out in article 121:

  1. the employer has not fulfilled its obligations to the employee (for example, failure to pay salaries); and
  2. (the employer or the employer's legal representative has not fulfilled its obligations to the employee (for example, failure to pay salaries).

End of Service Gratuity (EOSG)

The amount of an end-of-service gratuity paid to an employee following the termination of a limited-term contract depends on a variety of factors, including-

  1. whether the contract was terminated by the employer or the employee; and
  2. the number of years of service.

The following are the minimum end-of-service gratuities that are payable under various circumstances:

  • EOSG where contract is terminated by Employer

When an employer terminates a limited term contract, the EOSG is only due if the employee has completed one (1) year or more of continuous service and is determined on the basis of 21 calendar days' basic pay for each year of the first five (5) years of service and 30 calendar days' basic pay for each year after that (after year five). If the contract has been terminated for gross misconduct by the employee, however, no EOSG is payable.

  • EOSG where contract is terminated by Employee

When an employee terminates a limited-term contract before completing five (5) years of continuous service, the employer is not obligated to pay any EOSG. If the employee has completed more than five (5) years of continuous service, EOSG is payable on the same basis as described in paragraph above (a). If the contract is terminated under article 121, the employee is entitled to their full EOSG if they have worked for one (1) year.

Unlimited Term Contracts

An unlimited term contract is a type of contract that is open-ended, more flexible, and widely used in the UAE. It can be ended by mutual consent or by offering a 1 to 3 month notice period. During the notice period, both parties must fulfil their responsibilities.

Contract Period

An unlimited-term employment contract, as the name implies, is not for a set period of time and requires a continuing employment obligation between the employer and the employee until either party terminates it. If a contract of employment does not specify a period or expiration date, it is deemed to be an unlimited-term contract, regardless of the parties' intentions at the time of signing.

Termination

An unlimited term contract can be terminated in the following ways:

  • Termination by Employer

An employer may terminate an unlimited term contract for a reasonable reason (for example, the employee's failure to perform after repeated warnings) by giving the employee sufficient notice (minimum one (1) month and maximum three (3) months) in compliance with the employment contract's terms. The employer is only expected to pay the employee his end-of-service gratuity in this situation. If an employer terminates an indefinite term contract without cause, the employer will be liable to pay the employee compensation equal to three (3) months remuneration for convenience in addition to the end of service gratuity.

  • Termination by Employee

An employee has the right to terminate an indefinite term contract for convenience by providing the employer with sufficient notice (minimum one (1) month and maximum three (3) months) in compliance with the employment contract's terms. And if the employee terminates the employment contract, the employer is still obligated to pay the employee the end-of-service gratuity.

  • Termination by Employer for Gross Misconduct

If the conditions set out in Article 120 of the UAE Labour Law apply, an employer may terminate an unlimited-term contract without providing any notice or paying any termination fee (including end-of-service gratuity). Article 120 of the UAE Labour Law specifies the following situations:

  1. if the employee commits a mistake that causes the employer substantial material loss;
  2. if the employee disobeys safety instructions at work;
  3. if the employee reveals confidential information of the employer; or
  4. if the employee is convicted of a crime against honour, honesty, or public opinion.
  • Termination by Employee for Gross Misconduct

If any of the conditions mentioned in Article 121 of the UAE Labour Law apply, an employee may terminate a fixed term contract without providing notice or paying any termination compensation. The employee is attacked by the employer or the employer's legal representative in the situations set out in article 121:

  1. the employer has not fulfilled its obligations to the employee (for example, failure to pay salaries); and
  2. the employer or the employer's legal representative has not fulfilled its obligations to the employee (for example, failure to pay salaries).

 

End of Service Gratuity (EOSG)

The amount of an end of service gratuity paid to an employee upon termination of an indefinite term contract depends on a variety of factors, including

  1. whether the contract was terminated by the employer or the employee, and
  2. the number of years of service.

The following are the minimum end-of-service gratuities that are payable under various circumstances:

  • EOSG where contract is terminated by employer

When an unlimited term contract is terminated by the employer, the EOSG is only payable if the employee has completed one (1) year or more of continuous service, and is determined on the basis of 21 calendar days' basic pay for the first five (5) years of service and 30 calendar days' basic pay for each additional year (after year five). If the contract has been terminated for gross misconduct by the employee under Article 120, however, no EOSG is due.

  • EOSG where contract is terminated by employee

When an employee terminates an unlimited term contract after completing at least one (1) year of continuous service, the EOSG is measured first on the same basis as in paragraph (a) above, and the EOSG payable is then defined as follows:

  1. If the employee has not worked for more than three (3) years, the EOSG payable is equivalent to 1/3 of the total EOSG amount;
  2. If the employee has worked for more than three (3) years but not five (5) years, the EOSG payable is equivalent to two-thirds of the overall EOSG; or
  3. If the employee has worked continuously for more than five (5) years, the whole sum must be paid without deduction.

                                                                                   Employment Contract

This contract is made on ___________________(Date), at ________________(Place) and

                                                                                     Between

Employer / Company:___________________

Country:United Arab Emirates

Address: ____________________ 

Represented by           : ____________________

(Herein after referred to as “the Employer” or intermittently “Company”)

                                                                                     AND

Mr./Mrs./Ms.        : ________________________

Nationality            : ________________________  

Passport Number:________________________

Address                  : ________________________

(Herein after referred to as “the Employee”)

WHEREAS, both the parties hereto having full legal capacity to contract, has mutually agreed as follows:

  1. POSITION

The Employee undertakes to work for the Employer as ________________________ (Position of the employee) at the locations / offices of the Employer.

2.  COMMENCEMENT AND PROBATION

 The employment will commence from ___________________________. The duration of the agreement shall be until _________________________.

Duration of Six months from the above commencement date shall be probation period, during which either party may terminate this contract without any advance notice.

 

3.  PERFORMANCE OF DUTIES

The duties and responsibilities are as described in the job Description attached to this Contract or provided subsequently. The Employer may direct the Employee to perform such other duties and undertake such other responsibilities as it considers fit from time to time. The Employee shall perform all duties in accordance with reasonable directions, policies and requirements of the Supervisor. The employee shall use the best endeavours to provide the services in a professional manner and in accordance with concerned standard industry practice and shall take all steps required to ensure the deliverables to be suitable for the purpose intended, according to such standards.

The Employee shall exercise all skill, care and diligence in the discharge of the duties, agreed to be performed. Employee shall perform all such duties which are reasonably ancillary to the scope of work. The Employee must comply with all standards, policies and procedures that relate to the business as amended by the Employer from time to time.

4. HOURS OF WORK

  1. The Company working hours is from _____ am to _____ pm _______day to ___________ day. The working hours shall be Eight hours per day. However, the employee is expected to complete the daily tasks even after the normal working hours as necessary;
  2. The Employee will be entitled for all public holidays as announced by the Government Authorities for the private sector with full pay.

 

5. REMUNERATION AND ALLOWANCES

 

  1. The Employer will pay the Employee the remuneration and allowances as below;
  1. Basic Salary (AED/Month)- _______________________.      
  2. Accommodation (AED/Month)- __________________.
  3. Transportation (AED/Month) - ___________________.
  4. Education Allowance (AED/Month)- _____________.
  5. Work Nature Allowance (AED/Month)- __________.

TOTAL (AED/Month) = _____________

  1. The above gross salary will be paid in hand or transferred into the chosen UAE bank account, before 5th day of every subsequent month.
  2. The salary and allowances shall be reviewed periodically at the option of the Employer.

 

6. LEAVE

  1. Employee will be entitled to 30 days annual leave with full pay upon completion of every 12 months of service with the company.
  2. The annual leave entitlement includes intervening weekends, official holidays or intervening periods of sickness.
  3. The annual leave cannot be taken until completion of at least 6 months of service. Where the Employee’s period of service is more than 6 months but less than one year then the Employee can avail the leave at the proportion of 2 days a month.
  4. The Employee will be entitled for sick, maternity and other leaves as per the UAE labour Law or prevailing laws applicable in UAE.

 

7. OTHER BENEFITS

 

  1. Medical Expenses-Employee will receive medical expenses coverage for self as per the Company policy upon joining the Company. The coverage will be according to the prevailing laws applicable in UAE.
  2. Air ticket entitlement - One return economy class air-ticket (Sharjah /Dubai to your nearest home town as shown in passport) will be provided for yourself, while proceeding on annual leave once every year.
  3. Gratuity in accordance with UAE Labour Laws & Regulations as in prevailing laws applicable in UAE.

 

8. AUTHORITY PROPERTY

  1. Employee will do everything necessary for the proper safeguarding of Employer’s property / equipment entrusted to employee for operation/use. Any negligence on employee’s part in such upkeep or any loss taking place as a result, will not only entail recovery of the value of the loss from payments due to employee, but will also be deemed sufficient ground for termination of this agreement. Any intellectual property rights that belong to the employer and any partly completed assignments or works in progress will also be considered as Employer’s property for the purpose of this clause.
  2. Any employer property entrusted to employee for employee’s personal use during employee’s association with the employer must be returned to the employer, after use, in good repair, normal wear and tear exempted. In case the employer had deteriorated, while in employee’s custody, due to negligence on employee’s part, the employer reserves the right to recover from employee the cost of repairing and restoring it.

 

9. CONFIDENTIALITY

 

  • Employee will not divulge to any outside persons or concerns any information and secrets connected with the Employer that employee may come across during the performance of employee’s duties.
  • Employee will treat all matters relating to the Employer in strict confidence and not disclose them to outsiders except with the prior written authorization of the Employer. In particular, employee is expected to maintain complete confidentiality in respect of work.
  • “Confidential Information” includes, but is not limited to, the following types of information:
  1. Any information relating to the Employer’s technology or intellectual property.
  2. Details of Employer’s facilities, equipment and methods of operation.
  3. Any information relating to the Employer’s product development
  4. Details of customers, suppliers or other third parties working with the Employer
  5. Any information on the Employer’s commercial agreements.
  6. Any financial information.

 

  • Any other information not generally available to the public, or which the Employee ought to reasonably consider is confidential.
  • Employee acknowledge that employee’s obligations relating to confidentiality survive the termination of employment and employee will be liable to pay damages and be subject to injunctive or other relief for any breach of aforesaid obligation.

10. DATA PROTECTION

  1. By signing this statement, the Employee acknowledge and agree that the Company is permitted to hold personal information about the Employee as part of its personnel and other business records, and that the Company may use such information in the course of the Company's business. 
  2. The Employee agree that the Company may disclose information about you to third parties if the Company considers that to do so is required for the proper conduct of the Company's business or that of any associated company.  This Clause applies to information held, used or disclosed in any medium.

11. CONFLICT OF INTEREST

  1. Employee will treat all client information as confidential and not disclose them to outsiders except when authorized.
  2. While in service employee will not have, directly or indirectly, any other business interest and employee will not accept any other assignment part time or honorary, without prior and proper permission in writing from the Employer.
  3. In the course of employee’s association with the employer, employee is bound to come across information that is of a vital and confidential nature, pertaining to the sector. It is therefore expressly agreed, as an important component of this appointment, that employee will not associate either self, directly or indirectly, either during employee’s association with the employer or for a period of Twelve months thereafter, with any sector of a competitive nature in UAE or any part of the world.
  4. Employee further confirm that, neither during the employment nor during the period of Twelve months following the Termination Date, whether directly, through employees or agents or otherwise and whether on own behalf or on behalf of any person, directly or indirectly, will not so as to compete with the Company carry on, be engaged, employed, or at all interested in, any activity with any business, in particular providing the same services as the employer which is or is intended to be in competition with the business of the company or Company Services in UAE or any part of the world.
  5. Any information or data made available to employee by the Employer or by the customers and suppliers or by any other party, or any innovation or improvement in process, design, etc., effected in the course of employee’s association with the employer will belong to the Employer and will be kept by employee in strict confidence and will not be used by employee to the detriment of the Employer’s interests at any time.
  6. In the course of employee’s service with the employer or even after employee’s discharge from service, if any malaise intention on employee’s part is established, resulting in crippling of the Employer’s functioning, or causing the Employer financial loss, or damage to the Employer’s image, reputation or goodwill, the Employer has the right to prosecute employee under relevant laws and seek redress.

12. TERMINATION OR RESIGNATION

  • Employee’s services may be terminated by the employer by giving 30 days notice in writing or on payment of one month’s salary in lieu of the notice.
  • In case of resignation during the contract period, employee shall give 30 days’ notice in advance or else employer has the right to claim compensation in accordance with the UAE Labour Laws & Regulations as in prevailing laws applicable in UAE.
  • This contract may be terminated by the employer without notice in following cases;
  1. If the employee adopts a false identity or nationality or if submits forged documents or certificates.
  2. If the employee commits an error causing substantial material loss to the employer.
  3. If the employee violates instructions concerning safety of the place of business.
  4. If the employee fails to perform his/her basic duties.
  5. If the employee is awarded final judgment by the competent court in respect of an offence prejudicing honour, honesty or public morals.
  6. If the employee during working hours is found drunk or under the influence of drug.
  7. If the employee in the course of work commits an assault on the employer, the manager or any of the colleagues.
  8. If the employee absents himself without lawful excuse for more than twenty intermittent days or more than seven successive day during one year.

 

13. OTHER

  1. Employee agree to comply with and abide by the policies, procedures, guidelines, code of conduct, standing orders and other rules and regulations of the Employer that may currently be in-force or that may be issued or communicated to employee from time to time, through the Employees’ Manual, Circulars, Notices or otherwise.
  2. Compliance with all statutory regulations is of prime importance. Any negligence or failure on employee’s part, in carrying out employee’s duties which directly or indirectly results in non-compliance by the Employer, of any statutory regulation, will not only result in termination of this appointment but will also entitle the Employer to recover from employee any penalty or loss to which the Employer is/was subject, together with any additional damages as the Employer may think fit and proper.
  3. Employee’s appointment is based on the assumption that employee have never been charged with any criminal offence under any Law in force. In case employee are so charged during the period of employee’s association with the employer, or if any past record of employee’s having been so charged come to light, employee’s appointment will stand terminated automatically.
  4. Employee’s appointment is subject to employee being fit, physically and mentally at all times, to carry out with clarity and in team spirit, the functions assigned to employee.

 

14. GENERAL

  1. This agreement shall be governed by and construed in accordance with the concerned law applicable in UAE.
  2. This agreement is made in 2 copies. Each party shall have one copy.
  3. This Agreement supersedes any previous agreement between the Employer and the Employee.
  4. The headings, titles and subtitles used in this Agreement are for ease of reference only and shall not control or affect the meaning or construction of any provision hereof.
  5. This Agreement has been read by the above-mentioned parties and they have understood its texts, terms and conditions and accepted it and accordingly they signed.

 

15. OTHER CONDITIONS

_________________________________________________________________________________________________________________________________________________________________________________________________________.

The Employer

 

Name:

Signature-………………………………………

 

The Employee

 

Name:

Signature- ……………………………………

 

Date: 

Date: 

 

Disclaimer: The information contained in the sample document is general information and should not be considered as bank or authorized advice to be applied to any specific factual situation. All information and documents are as per dhanguard experience.

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