UAE employee on fixed term contract can be penalised for breaking its terms

I have completed a two-year contract at my school and signed a contract for another two years. I have since received an offer from another school and I want to change jobs. Will the school ban me for six months and what about my salary for August. Will they block this too? BH, Sharjah

Anyone who is on a fixed-term contract can be penalised for breaking the terms of the contract early, and as BH has signed a new contract the employer can choose to apply a penalty. According to UAE Labour Law, Article 116: “If the contract has been terminated on part of the employee … the employee becomes liable for compensating the employer against losses incurred by him in consequence of contract termination, provided that the amount of compensation may not exceed half a month’s pay for a period of three months or for the remaining period of contract whichever is shorter, unless the terms of the contract provide otherwise”. This should be calculated on the basic salary. The end of service gratuity is forfeit in this case in accordance with Article 138 of Labour Law: “If an employee under a contract with limited period leaves his work at his own option before the end of the contract period he shall not be entitled to end of service gratuity unless the period of his continuous service exceeds five years”. For breaking the terms of the contract, BH could receive an employment ban of six months. This shows that people should think carefully before accepting any fixed contract, as while it may provide additional protection to employees it also limits them and there can be significant consequences for breaking the agreed terms.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai, with over 20 years’ experience. Contact her at [e-mail]. Follow her on Twitter at @FinancialUAE.

The advice provided in our columns does not constitute legal advice and is provided for information only.

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