Amendments to UAE labor law: Expiration, renewal, and period of contract
Earlier this year, the government lifted the three-year limit on fixed-term employment contracts, allowing parties to negotiate the length of their contracts.
A new law that went into effect in February 2022 has been amended by Federal Decree-Legislation No. (14) of 2022.
According to the new UAE Labour Law, all private sector employees must be hired on fixed-term contracts lasting no longer than three years.
It was feared that the short-term nature of fixed-term employment contracts would signal a lack of permanency in the relationship, making it more difficult for UAE enterprises to hire and retain talent.
By abolishing the three-year limit on fixed-term employment contracts, the UAE Government has addressed both employee and employer concerns.
UAE Labour Law provides the following status:
- The parties to an employment contract may agree on a term of 5 years
- The parties to an employment contract may cancel the contract prior to its expiry by providing 30-90 days written notice (as agreed in the contract).
As a matter of fact, this structure is more similar to an unlimited-term employment contract than to a fixed-term employment contract.
According to the new UAE Labour Law, many firms have already given their staff three-year fixed-term contracts.
Those employers will have two main options:
- leave the existing employment contracts in place and then renew the contract for the same or longer term (or not renew at all) when it expires;
- increase the term of the existing employment contract through a written contract variation signed by the employee.
The timeframe for transitioning all employees to fixed-term employment contracts in accordance with the new UAE Labour Law remains February 2023.