Difference between limited and unlimited contracts in UAE 2019

Definition and Duration:

When you and your boss agree to work together for a set amount of time, from one date to the next, this is called a limited contract. It’s the same as deciding to work together for a certain time, like a few years.

This contract lets you and your boss agree to work together, but there is no set end date. To agree to work together without saying when you will stop is the same thing. You start working immediately and continue until one of you says so.

Termination Rules:

Limited Contract: Your boss must pay you if they decide to end the contract before the agreed-upon date, and it’s not because of a reason listed in the rules. Usually, this is three months’ worth of your pay or the amount of time left on your contract, whichever is less. For the same reason, you might have to pay your boss if you quit early without a good cause. This payment is usually based on how much time is left on your deal or six weeks’ worth of pay.

Unlimited Contract: If you or your boss wants to end the contract, you usually must let the other person know. This time frame is known as a clause. You have to tell each other at least 30 days before you leave. If both of you agree, this time frame can be longer, but it should be at least three months. You can both plan for the change now.

Compensation for Early Termination:

Limited Contract: Your boss has to pay you if they decide to end your contract early, and it’s not for a reason written in the rules. Either three months’ pay or the amount of time left on your deal, whichever is less, is what this money is for. In the same way, you might have to pay your boss some money if you quit your job without a good reason before the end of your contract. This payment usually equals six weeks’ pay or the amount of time or less left on your contract.

Unlimited Contract: If you or your boss want to end the contract, you likely need to let the other person know. This time frame is known as a clause. You need to tell each other at least 30 days before you leave. If both of you agree, this time frame can be longer, but it should be at least three months. You can both get ready for the change now.

End of Service Gratuity:

What you get at the end of your job in the UAE is called an “end-of-service gratuity.” It is like getting paid by your boss to say thanks for all the time you worked there.

Calculation method based on the most recent basic salary:

The amount of this thank-you payment is based on how much money you were making at the job near the end. They look at your basic salary, which is the main part of your pay that doesn’t include bonuses or benefits.

Eligibility criteria and differences between limited and unlimited contracts:

But only some get this thank-you gift. You must have worked nonstop for at least a year. It’s common that if you’ve worked less than a year, you won’t get anything. This rule still applies to you, whether your contract is restricted or unlimited.

When it comes to this thank-you payment, here’s the difference between limited and endless contracts:

If you’ve had a limited contract for more than a year but less than five days, you get paid for every year you work. It is the same as getting paid for 21 days every year. You still get paid for each year you work after five years, but it’s a little more. After the first five years, you get 30 days’ pay every year, but you can only get up to two years’ pay altogether.

Whether you quit on your own or because your boss told you to, there are different rules for the thank-you payment. Each one is a little different, depending on how long you’ve worked there and why you’re going.

Implications for Employers and Employees:

Both employers and workers must choose between a limited and an unlimited contract. Think about these things:

Considerations when choosing between limited and unlimited contracts:

Stability vs. Flexibility: Limited contracts are stable because they have a set end date. It can be helpful for both employers and employees. Employers need to know who they are hiring, and employees want to know when they can finish their job. On the other hand, unlimited contracts give you more freedom because they don’t have a set finish date. It might be better for companies who want to keep good workers for a long time or for workers who wish job security without worrying about when their contract ends.

Termination Rules: Both the employer and the worker should know the rules for ending the contract early. There are specific rules and penalties for ending a limited contract early, but notice times for unlimited contracts are more flexible.

Understanding the financial and legal implications for both parties:

Financial Planning: Both employers and workers should consider how each type of contract will affect their finances. For example, employers may have to pay money if they break a limited contract early. On the other hand, employers may not have to pay as much if they fail an unlimited contract, but workers who stay with the company for a long time may get more money as a gratuity.

Legal Compliance: Both employers and workers must know and follow the laws that apply to each type of contract. This means following the rules for firing set out in the UAE Labour Law and ensuring that the end-of-service bonus is calculated correctly.

Legal Framework:

Knowing the law regarding job contracts in the UAE is very important. Know this:

References to specific articles of the UAE Labour Law governing employment contracts:

The UAE Labour Law spells out the rules and laws that control job contracts in the country. Some of the articles spell out employers’ and workers’ rights and duties. Article 120, for example, talks about ending restricted contracts, while Article 121 talks about ending unlimited contracts. These pieces have important rules about how to end a contract and how much money may be needed.

Compliance with legal requirements for contract termination and gratuity calculation is important:

When it comes to ending a contract and figuring out pay, both employers and workers must follow the rules set out in the UAE Labour Law. This means following the rules for giving notice, paying compensation when it’s due, and correctly calculating the employee’s end-of-service bonus based on their most recent basic salary.

Follow these legal rules to avoid disagreements and legal consequences for both sides. Because of this, it’s important to know and follow the law to prevent problems or punishments.

Employers and workers can protect their rights and interests while keeping the working relationship fair and polite by following the UAE Labour Law and staying current on the laws that apply to them.

Conclusion

Finally, employers and workers in the United Arab Emirates (UAE) must know the differences between limited and unlimited employment contracts. Limited contracts are stable because they have a set end date, while unlimited contracts are flexible because they don’t have one. There are different rules for ending each type of contract, which can affect the end-of-service bonus.

When employers and employees choose between limited and unlimited contracts, they must carefully consider their choices. They should consider stability, flexibility, termination rules, and the financial effects. To avoid problems and fines, it’s important to follow the rules set out in the UAE Labour Law. These rules cover things like ending a contract and figuring out a bonus.

Employers and employees can protect their rights and interests while building fair and respectful working relationships by knowing the law and making smart choices. Following the law and communicating are important for ensuring everyone has a good time at work.

Ittihad Legal Consultants

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