What is a Limited Contract?

Limited Contract – Employment

For individuals who are employed in UAE, there are 2 types of contract that can be signed between them and their employers:

1. LIMITED CONTRACT

2. UNLIMITED CONTRACT

In this post I will write about Limited Contract.

What is a Limited Employment Contract?

As the name suggests, a limited contract is signed between the employer(company) and employee which is bound to expire on the date of the expiry of contract and is for a fixed term of time, usually 2 years. This means, a company can employ their employees for a certain period and not renew the contract. An employee who is employed on a Limited Contract has responsibility to the company till his contract is valid. After the contract expires, the employee need not work for the company.

Why do companies have Limited Contract?

For a company which has most of their projects to be completed within 2 years, there is no need to have more employees on their payroll. In such situations, companies hire employees for limited period. Limited Employment Contracts also help companies to gauge the performance of their employees over a longer term and if the employee is not up to their expectation, they need not renew the contract for that employee. Hence the burden of termination is not applicable. 

What about employees?

Employees who have signed a labour contract should carefully read their employment contract to see whether contract type, whether it is a limited employment contract or an unlimited labour contract. This will help them to understand their rights.

What happens if I resign under Limited Contract?

There are possibilities that as an employee, you would want to resign from your position before the Limited Contract is expired. 

If you resign under limited contract without completing your contract term, your employer may impose a ONE YEAR ban. In addition to this the as per UAE Labour Law provisions, the employee will have to pay half of 3 months’ early termination compensation to the employer. 

What if the company / employer terminates a Limited Contract?

If your company terminates your contract, the company will have to pay you minimum 3 months’ compensation or compensation for the remaining period of time.

Is there notice period in Limited Contract?

This will depend on the provisions of your employment contract. If it is mentioned that you will have to give a notice period, you will need to intimate your employer of the same.

Do I get gratuity or end of service benefits under Limited Contract?

Yes. You will receive gratuity under Limited Contract if you have completed 1 year of service.