Contract of employment may be for limited or unlimited period of time

As per Article 38 of the Federal Law, a contract of employment may be for an unlimited or for a limited period.

  • Compiled by Dina Aboul Hosn
  • Published: 00:29 March 14, 2008
  • Gulf News

A reader from Dubai asks: I would like to ask what the difference is between a limited and unlimited labour contract? Kindly explain to us so we have knowledge regarding these matters. Kindly cite the rules regarding the said contracts.

As per Article 38 of the Federal Law, a contract of employment may be for an unlimited or for a limited period.

If it is for a limited period, the contract shall not exceed four years and the contract may be renewed by mutual agreement between the parties for a similar or a shorter period on one or more occasions where a contract is renewed. The further period or periods shall be deemed to be an extension of the original period and shall be added thereto when calculating the worker's total period.

Therefore, the Article allows both parties - the employer and the employee - to select the contract type.

As for the difference between the limited and unlimited contract, we quote the following as per Article 117:

(A) Both the employer and the employee may terminate a contract of employment of unlimited period for a valid reason at any time following its conclusion by giving the other party a notice in writing at least 30 days before the termination.

(B) In case of workers working on a daily basis the period of notice shall be as follows:

1) One week, if the worker has been employed for more than six months but less than a year.

2) Two weeks, if the worker has been employed for not less than one year.

3) One month, if the worker has been employed for not less than five years.

The limited contract, according to Article 115 and 116 of the Labour Law, is a contract of employment for a limited period of time and if the employer revokes it for reason other than those specified in Article 120 he shall be required to compensate the worker for any prejudice the latter sustains, provided that the amount of compensation shall in no case exceed the aggregate remuneration due for a period of three months or the contract contains a provision to the contrary where a contract is revoked by the worker for reasons other than those specified in Article 121 he shall be required to compensate the employer for any prejudice the latter sustains as a result provided that amount of compensation shall not exceed half the worker's remuneration for three months or the residual period of the contract which ever is shorter unless the contract contains a provision to the contrary.

Questions answered by Mohammed Ebrahim Al Shaiba of Al Bahar Advocates and Legal Consultants

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