The UAE Labour Law governs the employment relationship between employers and employees in the UAE. Given the significant number of expatriates employed across the country, it is important for both employers and employees to understand some of the key terms commonly found in UAE employment law and employment contracts.
This article provides a general overview of some of the most commonly used employment law terms.
1. Unlimited Contract
An unlimited contract is one which has a start date but no specified end date. Historically, these types of contracts were common in the UAE and were generally considered more flexible than fixed-term contracts.
It is important to note that UAE employment legislation has developed over time, and employers and employees should ensure that their contracts comply with the current UAE Labour Law.
2. Fixed-Term Contract
A fixed-term contract is one which has both a start and an end date. The contract will generally come to an end upon expiry of the agreed term, unless it is terminated earlier in accordance with the applicable law and contractual terms or renewed by the parties.
Understanding the terms relating to fixed-term employment contracts in the UAE is particularly important when considering termination and renewal.
3. Ministry of Human Resources and Emiratisation
The Ministry of Human Resources and Emiratisation (“MOHRE”) is the UAE government authority responsible for regulating many aspects of employment and labour relations in the private sector.
MOHRE is involved in matters including employment permits, labour regulations and certain disputes between employers and employees.
4. End of Service Gratuity
An end of service gratuity is a monetary benefit that eligible employees may be entitled to receive at the end of their employment, subject to the applicable legal requirements and the employee’s circumstances.
The calculation and entitlement to gratuity can depend on factors such as the employee’s period of service and the reason for termination.
5. Restrictive Covenants
Restrictive covenants are contractual obligations contained within an employee’s employment contract which impose certain restrictions on an employee’s activities after their employment has ended.
These may include non-compete, non-solicitation or confidentiality provisions and can have a significant impact on an employee’s future employment prospects.
Such clauses should be carefully drafted to ensure that they are appropriate and enforceable under applicable UAE law.
6. Arbitrary Dismissal
Under UAE employment law, an employer may terminate an employee’s employment in accordance with the circumstances and procedures permitted by law.
Historically, the concept of arbitrary dismissal was used in relation to certain terminations that were considered unlawful. Employees and employers should now consider the specific provisions of the current UAE Labour Law when assessing whether a termination is lawful and what entitlements may arise.
7. Wage Protection System
The Wage Protection System (“WPS”) is an initiative designed to safeguard the payment of workers’ wages through transfers made via authorised and regulated financial institutions.
The WPS allows the relevant authorities to monitor wage payments in the private sector and helps ensure that employees receive their agreed wages in accordance with the applicable requirements.
There can be serious consequences for employers who fail to comply with applicable UAE WPS requirements.
8. Labour Card
A labour card historically identified an employee and their place of work in the UAE. The UAE employment system has since moved towards electronic employment records and permits.
Employers must ensure that employees have the appropriate work permit and employment documentation before commencing employment, in accordance with the applicable UAE regulations.
9. Free Zone Employment Contract
Employees working in UAE Free Zones may be subject to the regulations and employment procedures applicable to the relevant Free Zone, depending on the circumstances.
Free Zone employees may have different employment arrangements from employees working for mainland companies. However, employees generally retain rights to bring appropriate claims against their employers in accordance with the applicable legal framework.
Employers and employees should therefore obtain specific advice where there is uncertainty about Free Zone employment law in the UAE.
10. Notice Period
If either party to an employment contract decides to terminate the employment relationship, the terminating party will generally be required to provide the other party with the applicable notice.
The UAE Labour Law provides for notice requirements, and the employment contract may specify the applicable notice period within the limits permitted by law.
It is important to check the employment contract carefully before resigning or terminating an employee to understand the applicable notice requirements and any potential consequences.
11. Director’s Service Agreements
A director or manager of a company in the UAE is expected to act in the company’s best interests when carrying out their responsibilities on behalf of the company.
Any Director’s Service Agreement should therefore be carefully drafted to clearly establish the director’s duties, responsibilities, remuneration, confidentiality obligations and any appropriate restrictions designed to protect the company’s interests.
A well-drafted agreement can help provide greater clarity for both the company and the director and reduce the risk of future employment or contractual disputes.
Our Employment Law Team
Our expert Dubai labour lawyers, consisting of UK-trained lawyers, will be happy to assist with your employment queries, including questions relating to UAE Labour Law, termination of employment, employee entitlements, employment contracts, restrictive covenants, end of service gratuity and Director’s Service Agreements.
We also advise businesses on the preparation and review of Human Resources policies and employment documentation, in line with good international practice and applicable UAE requirements.
If you require advice on an employment matter or need assistance with drafting or reviewing an employment contract, please contact our employment law team to discuss your requirements.
