UAE employment contract changes: deadline, what is fixed term and all you need to know

All private sector employees must sign a new contract by February 1

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The UAE’s amendment to fixed-term employment contracts is mandatory for all private sector companies and must be completed by the February 1 deadline, the Ministry of Human Resources and Emiratisation says.

In October last year, the UAE government lifted the three-year cap on the duration of private sector fixed-term contracts as part of its reforms to the country’s labour laws.

In recent years, the UAE, the Arab world’s second-largest economy, has introduced a number of economic, legal and social reforms to strengthen its business environment and increase foreign direct investment.

It also aims to attract skilled workers with new visas and provide incentives to companies to set up or expand their operations in the UAE.

The UAE employment market has also made a strong recovery from the coronavirus-induced slowdown, boosted by the government’s fiscal and monetary measures.

“The UAE government continues to develop regulations and laws that align with what the next 50 years of UAE’s development demand,” Abdulrahman Al Awar, Minister of Human Resources and Emiratisation, said last October, when the amendment was announced.

“The laws and regulations support our business environment’s stability and improve its resiliency and attractiveness.”

Here is everything you need to know about the changes to the UAE’s private sector employment contracts.

What changes have been made to employment contracts in the UAE?

In February last year, the UAE government introduced new legislation that updated the country’s labour laws.

Under the amendments, private sector employees’ permanent or indefinite contracts would be replaced with renewable three-year contracts.

However, in October, the government issued Federal Decree-Law No 14 of 2022, which removed the planned three-year limit on fixed-term employment contracts.

This means that private sector companies are now required to issue new contracts that cover a defined term of employment, which can be renewed “subject to an agreement by both parties to a contractual relationship”, the Ministry of Human Resources and Emiratisation said.

However, there will no longer be a limit on the length of the contract, it added.

It also means that employers and employees must agree on the duration of the contract.

“The regulations follow the UAE’s advanced developmental model and its fundamentals and principles that are built on justice, respecting human rights and staying ahead of changes. This guarantees the UAE’s continued progress, stability and pioneering stature,” Mr Al Awar said at the time.

What is the deadline for the new contracts to be completed?

All private sector employers must transfer to the new contracts by Wednesday, February 1.

Companies that fail to meet the deadline risk being fined by the Ministry of Human Resources and Emiratisation. It is not yet known what the penalty will be.

Labour law changes — in pictures

Is it mandatory for all employees in the UAE to sign a new contract?

Yes, it is mandatory for private sector employees to sign the new contract.

However, employees working for companies operating in the financial free zones of Abu Dhabi Global Market and Dubai International Financial Centre are exempt, as are domestic workers.

Will employees have to pay for the new contracts?

No, the cost of transferring the new employment contracts is paid for by the employer and they cannot pass this on to employees.

Will this affect my job?

No, it will not affect your day-to-day responsibilities.

However, it will allow private sector companies and employees to agree on part-time work, job sharing and other tasks, the Ministry of Human Resources and Emiratisation said.

The amendment also aims to protect both parties in a balanced way that advances the labour market’s growth and stability and enhances the UAE’s economic competitiveness, it added.

“The new amendments create an advanced ecosystem of mechanisms that boost the ease of doing business, productivity, and resilience within the labour market, while amplifying its attractiveness to the business owners and talents,” Mr Al Awar said.

Updated: January 27, 2023, 7:11 AM