02 Aug 2015


The Federal Law No 8. Of 1980 is the legislation that governs UAE Labour Law. Given the huge number of expatriates employed in the UAE, it is significant to know some of the key terms contained in the UAE Labour Law and in many employment contracts and this Article aims to outline some of these.

1.Unlimited Contract

An unlimited contract is one which has a start date but no end date. These types of contracts are usually the most common types of contracts in the UAE and are recognised as more flexible and employee friendly contracts, in comparison to fixed term contracts.

  1. Fixed Term Contract

A fixed term contract is one which has both a start and an end date.  These types of contracts terminate upon the expiry of the fixed term, unless either party terminates the contract earlier or the contract is renewed.

  1. Ministry of Labour

The Ministry of Labour is the official department for all labour related matters in the UAE. This Department is responsible for issuing work permits (labour cards) to employees and for dealing with any work related issues between employers and employees.

  1. End of Service Gratuity

An end of service gratuity is a monetary benefit/payment that employees in the UAE are entitled to receive, at the end of their service with their employer, providing that the relevant conditions are met.

  1. Restrictive Covenants

Restrictive Covenants  are binding legal obligations  contained within an employee’s contract that impose particular restraints on  certain types of employment activities of the employee, once their employment with their employer has ceased.  The majority of employment contracts in the UAE contain these covenants and these can have a significant impact on the employee’s future employment prospects. 

6.Arbitrary Dismissal

Under the UAE Labour Law, an employer is entitled to dismiss an employee without notice on the basis of certain grounds. In the event that such grounds are not satisfied then the employee’s termination will be recognised as arbitrary dismissal.

      7.      Wage Protection Scheme/System

The Wage Protection Scheme (“WPS”) is an initiative to safeguard payment of workers' wages via transfers through selected financial institutions authorised as well as regulated by the government.

WPS allows the Ministry of Labour to hold a database that records wage payments in the private sector to guarantee the timely and full payment of agreed-upon wages. Under the UAE Labour Law there are serious implications for employers who are in breach of the WPS.

    8.       Labour Card

A labour card identifies an employee and his/her place of work.  A labour card must be issued prior to an employee commencing employment in the UAE.

    9.       Freezone Contract

Free Zone employees are sponsored by the relevant Free Zones and not by their employers, however the employees do maintain their right of action against their employers before the courts.  Labour contracts in Free Zones are usually limited to two years. 

    10.   Notice Period

If either party to an employment contract decides to terminate the contract then the terminating party must give to the other party sufficient notice. The UAE law prescribes a minimum notice period of 30 days, however the contract may provide for a longer notice period.

     11.   Director’s Service Agreements

A director or manager of a company in the UAE is obliged, when dealing on the company’s behalf, to act in its best interests at all times.  Any Service Agreement drafted for a Director must be drafted carefully to include all of the duties and necessary restrictions to protect the Company

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