Employment contracts in the UAE differ based on the type of company, nature of work and the duration of employment. Here is a quick overview of what every HR professional in the UAE should know about contracts.
Employment Contracts in the UAE can vary based on whether your company falls under the Private sector or the Public sector. Before we classify the different types of employment contracts, it is essential to understand the difference between the Labor Contract and Contract of Employment. “Make sure you have two copies of the signed employment contract, one given to the employee and one with the company.”
For public sector companies, there are four different types of employment contracts:
- Full-time employment contract
- Part-time employment contract
- Temporary contract
- Special Contract
Full-Time Contracts: Under this contract, the employee works in the concerned position full time and receives the total salary and allowances allocated to the position. This contract is like any other full-term employment contract and the employee is expected to deliver services to the company for full working days or hours as specified.
Part Time Contracts: Under this contract, the employee is expected to work limited hours of the total working hours or days. The salary received by the employee is calculated proportionately to the number of working hours or days, plus the benefits and allowances. It is important to keep in mind that transferring of the contract from part time to full time and vice versa is possible upon the employee’s request, provided that the financial allowances for the same position are available.
Temporary Contract: The employee under this contract works the full working hours, throughout the working days, for a period of three months. This contract is renewable for similar periods. At the end of the temporary contract, the employee can be appointed in a full-time job that matches the employee’s qualifications, experiences and abilities. Make sure you modify the contract type and include the temporary contract period in the service period to make this change.
Special Employment Contract: The special employment contract is to appoint any employee with distinctive experience at a high post within the organization. The employee on a special contract is appointed by the minister. The contract period shall not exceed two years and may be renewed for another two years. The terms of the remuneration are determined by the ministry in coordination with the Ministry of Finance and approved by the Cabinet.
Private Sector companies can have three different types of employment contracts:
- Limited Contract
- Unlimited Contract
- Part Time Contract
Limited Contract: Also known as fixed term contract, this type of employment contract mentions the start and end dates of the employment period. The contract is canceled when it expires unless it is renewed before the expiry date. These contracts are commonly used for employees needed for a specific project or for a specific duration. Limited contracts have a maximum term of two years and can be renewed for a similar time period on expiry. As per the UAE Labor Law, the limited term contract must specify the start and end date, the remuneration and benefits, nature of work, the workplace and duration of the contract.
Unlimited Contract: These contracts are more open-ended and flexible as compared to Limited Contracts and are also known as Standard Employment Contracts. Unlimited Employment contracts can be terminated with mutual consent, and by giving a notice of 1-3 months, as specified in the contract. The contract must also specify the details of the employment like salary, benefits and allowances, date of joining, probationary and notice periods, leave cycle, annuals leave and working hours.
Part Time Contract: Implemented only in 2018, the Part-Time contract for private sector companies allows organizations to recruit skilled workers based in the UAE or abroad under a part-time work system. Employees on a part-time contract can take up several part-time jobs without the approval of the original or secondary employer. However, they must obtain a permit from the MoHRE for the same.
Employment contracts are one of the most important document while recruiting employees in the UAE. Make sure you have two copies of the signed employment contract, one given to the employee and one with the company. Understanding the types of employment contracts is essential as it dictates the calculation of gratuity and end of service benefits.