Deadline nears for UAE employment contract changes

Employers must switch workers on to limited-term contracts by February 1

Employment contract changes will affect most workers in the Emirates. Amr Alfiky / Reuters
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Latest: Firms 'scrambling' to meet UAE employment contract deadline

Two key employment law deadlines are looming for UAE companies, with the first in just over a week.

According to the latest labour law, all employers must transfer contracts by Wednesday, February 1, unless they are in The Abu Dhabi Global Market and Dubai International Financial free zones.

Families employing domestic workers are also exempt from the changes.

Businesses that fail to update employment contracts risk a fine or penalty — although authorities have yet to reveal what the penalty will be.

With the lifting of the cap of three years for a limited-term contract, this arrangement more closely reflects an unlimited-term employment contract than a true fixed-term employment contract
Shiraz Sethi, Dentons

The legislation may not affect your day-to-day employment,but it is part of a bigger overhaul of the private sector work landscape and a law first brought in in 1980.

The change will allow firms and staff to agree on part-time work, job-sharing and project-based tasks with more ease.

A federal decree issued in October removed a planned three-year cap on contracts, so it is up to employers to agree a term with the employee. Companies that already updated contracts, after the original decision last February but before the decree in October, may need to do so again.

Shiraz Sethi, a lawyer in Dubai who specialises in UAE labour law, said only time would show how the new rule affects the labour market.

"It is of paramount importance that employers in the private sector are advised to review and amend employment contracts if they are currently on an unlimited time frame by February 1, 2023 to avoid possible fines or sanctions," said Mr Sethi, regional head of employment at Dentons.

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"With the lifting of the cap of three years for a limited-term contract, this arrangement more closely reflects an unlimited-term employment contract than a true fixed-term employment contract.

"Only time will tell how this new requirement will play out in practice and how it will impact the labour market in the UAE."

The way private sector businesses operate will change to accommodate more flexible working and job-sharing.

Most of those in the private sector will work shorter, fixed-term contracts and be allowed to stay in the country for up to 180 days after leaving a job, under rules introduced last February.

In an update issued in October, the government lifted a three-year cap on the duration of fixed-term employment contracts in the private sector.

Under the new amendments, employment contracts must cover a defined term but the law will no longer set a cap on how long the contract can be.

Students and those returning to the workplace after a period away are most likely to benefit from more flexible working arrangements.

It will allow people to work for more than one employer for a specified number of working hours or days and also work on a temporary basis to complete a set contract.

A reminder was issued to employers, advising them to review their employment contracts and amend them where applicable to avoid fines or sanctions.

Unemployment insurance

The deadline for residents in the UAE to register for the unemployment insurance is also approaching.

All employees working for a company subject to the Ministry of Human Resources and Emiratisation must register by June 30.

The insurance scheme came into effect from January 1.

It will cost workers only Dh5 to Dh10 per month. If they lost their job, they could receive thousands of dirhams per month for three months to tide them over.

A full breakdown of the costs is here.

"Whilst employers are not obligated to register for their employees, they are able to if they would like to offer this as an additional benefit to their staff," said Mr Sethi.

"Employers should, however, continue to remind their employees of the need to register and encourage them to do so within the deadlines provided, otherwise face fines and penalties once the deadline has lapsed, similar to fines having already been issued to some companies who have failed to meet their Emiratisation quotas."

The social security support programme is a welcome financial safety net that will pay Emiratis and residents a cash sum for three months if they lose their jobs.

The system will ensure the sustainability of a decent life for Emiratis and residents during their unemployment period and will reduce business risks, the ministry said.

Updated: January 27, 2023, 7:10 AM