Indefinite contracts are endless and may be terminated for various reasons under the UAE Labor Law.
When is it appropriate to use an indefinite contract?
Compared with long-term contracts, long-term contracts are generally considered more flexible and user-friendly. Therefore, in the UAE, unrestricted agreements are more commonly used than restricted covenants. Such contracts can be used for employees who wish to be a permanent employee.
How can an employer terminate an indefinite contract?
According to the UAE Labor Law, employers have two main ways to terminate indefinite contracts legally: For “valid” that is, performance-related, notification reasons the UAE Labor Law provides for a notice period of at least 30 calendar days. However, the parties have the right to stipulate a more extended notice period in the contract; or Temporary without further notice and end-of-service remuneration for one of the 11 exact causes of serious misconduct described in Articles 88 and 120 of the UAE’s Labor Law.
Termination of indefinite contracts by Employees
Employees can resign by providing employers with a contract notice, which must be at least 30 days before from the date of employment or more based on the employment contract. Also, according to Article 121 of the law, employees can resign without notice.
How to calculate the end-of-service remuneration based on an indefinite contract when the employer terminates the contract?
Employees who have completed one year or more years of continuous service are entitled to end-of-service remuneration, which is calculated as follows: In the first five years of service, the basic salary for each year is 21 calendar days. The basic wage is increased by 30 calendar days per year. The premise is that the total wage does not exceed two years’ salary. Please note that according to the UAE Labor Law, employees are immediately dismissed due to serious misconduct and have no right to receive end-of-service remuneration.
How to calculate the end-of-service remuneration under the indefinite contract for employees to resign?
If an employee resigns from an unlimited contract, he or she is entitled to end-to-end pay: the term of service is one to three years: 2/3 reduction if the term of service is three to five years: 1/3 reduction if the term of service over five years, it will not be reduced.
List of the items that need to be included in the indefinite contract
According to the UAE Labor Law, an indefinite employment contract must at least specify:
- Date of conclusion
- The time the work started
- Nature of the work
- Remuneration amount