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Employment Contracts

Details on the types of employment contracts, including fixed-term and unlimited contracts, and their legal implications.

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Comprehensive Guide to Employment Contracts in the United Arab Emirates (UAE)

Employment contracts in the UAE are governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (commonly referred to as the UAE Labour Law), which came into effect on February 2, 2022. This law applies to all private-sector employees in the UAE, including those working in free zones (with some exceptions for specific free zones like the DIFC and ADGM, which have their own employment regulations). Below is a detailed guide to understanding employment contracts in the UAE:

1. Types of Employment Contracts in the UAE

Under the UAE Labour Law, there is now only one type of employment contract: the fixed-term contract. This change was introduced in 2022 to standardize employment practices. Key details include:

  • Fixed-Term Contracts: These contracts must have a specific duration, not exceeding three years, but they can be renewed or extended multiple times by mutual agreement.
  • Transition from Unlimited Contracts: Employers and employees who were previously on unlimited contracts were required to transition to fixed-term contracts by February 2023.

2. Key Elements of an Employment Contract

An employment contract in the UAE must be written and include the following mandatory details:

  • Employer and Employee Information: Full names, nationalities, addresses, and other identification details.
  • Job Title and Description: A clear description of the employee's role and responsibilities.
  • Workplace Location: The primary location where the employee will perform their duties.
  • Contract Duration: The start and end dates of the contract.
  • Probation Period: If applicable, the probation period (maximum of 6 months) must be specified.
  • Working Hours: Standard working hours are 8 hours per day or 48 hours per week, with overtime rules applicable.
  • Salary and Benefits: The agreed-upon salary (basic and allowances), payment frequency, and any additional benefits (e.g., housing, transportation, medical insurance).
  • Leave Entitlements: Annual leave (minimum 30 calendar days per year), sick leave, maternity/paternity leave, and other applicable leave types.
  • Termination Conditions: Grounds for termination, notice periods (minimum 30 days), and end-of-service benefits.
  • Applicable Law: A clause stating that the contract is governed by UAE Labour Law.

3. Standard Procedures for Drafting and Signing Employment Contracts

a) Drafting the Contract

  • Employers typically draft the employment contract in both Arabic and English (or another language understood by the employee). The Arabic version is legally binding in case of disputes.
  • The contract must comply with UAE Labour Law and any relevant free zone regulations.
  • Employers must ensure that the terms are clear, fair, and do not contradict the law.

b) Signing the Contract

  • Both the employer and employee must sign the contract before the employee begins work.
  • The signed contract must be submitted to the Ministry of Human Resources and Emiratisation (MOHRE) for private-sector employees outside free zones. For free zone employees, the contract is submitted to the relevant free zone authority.
  • Once approved, the employee will receive a labour card or equivalent documentation.

c) Work Permit and Visa

  • After signing the contract, the employer is responsible for applying for the employee’s work permit and residency visa. These are prerequisites for legal employment in the UAE.
  • The costs of the work permit and visa are borne by the employer, as per UAE law.

4. Costs and Fees Involved

a) Employer Costs

  • Work Permit Fees: These vary depending on the skill level of the employee and the employer’s classification under MOHRE. Fees typically range from AED 300 to AED 5,000.
  • Residency Visa Fees: The cost of a residency visa (valid for 2-3 years) is approximately AED 3,000 to AED 7,000, including medical tests and Emirates ID issuance.
  • Medical Insurance: Employers are legally required to provide health insurance for their employees. Costs vary depending on the coverage but typically range from AED 500 to AED 2,000 per year.

b) Employee Costs

  • Employees are not required to pay for their work permit, visa, or medical insurance. If an employer attempts to pass these costs onto the employee, it is a violation of UAE Labour Law.

5. Country-Specific Considerations

a) Cultural Aspects

  • Respect for Hierarchy: The UAE workplace culture often emphasizes respect for authority and hierarchy. This may be reflected in job titles and responsibilities outlined in the contract.
  • Language and Clarity: While Arabic is the official language, English is widely used in employment contracts. Ensure you fully understand the terms before signing.
  • Religious Sensitivities: The UAE is a Muslim-majority country, and workplace policies may reflect Islamic values (e.g., prayer breaks, dress codes).

b) Legal Protections for Employees

  • Non-Discrimination: The UAE Labour Law prohibits discrimination based on gender, race, religion, nationality, or disability.
  • Equal Pay: Men and women must receive equal pay for equal work.
  • End-of-Service Gratuity: Employees are entitled to a gratuity payment upon completing their contract, calculated based on their length of service.

c) Probation Period

  • The probation period cannot exceed 6 months. During this time, either party can terminate the contract with 14 days’ notice.
  • After the probation period, the standard notice period of 30 to 90 days applies.

d) Termination and Resignation

  • Notice Period: The minimum notice period is 30 days, but it can be extended by mutual agreement.
  • Unlawful Termination: If an employer terminates an employee without a valid reason, the employee may be entitled to compensation.
  • Resignation: Employees can resign by providing the agreed-upon notice period. If they fail to do so, they may face a labour ban (temporary restriction on working in the UAE).

6. Practical Advice for Employees

  • Read the Contract Carefully: Ensure you understand all terms, including salary, benefits, and termination conditions.
  • Verify Employer Obligations: Confirm that the employer will handle visa and work permit processes.
  • Keep a Copy: Retain a signed copy of your employment contract for future reference.
  • Seek Legal Advice: If you are unsure about any terms, consult a legal expert or the MOHRE for clarification.

7. Dispute Resolution

If disputes arise, employees can file a complaint with the MOHRE or the relevant free zone authority. The process typically involves:

  1. Mediation: MOHRE attempts to resolve the issue amicably.
  2. Labour Court: If mediation fails, the case is referred to the labour court. Employees are exempt from court fees for employment-related cases.

8. Conclusion

Employment contracts in the UAE are designed to protect both employers and employees, ensuring clarity and fairness in the workplace. By understanding the legal framework, standard procedures, and cultural nuances, employees can make informed decisions and safeguard their rights. Always ensure compliance with UAE Labour Law and seek professional advice if needed.