In the UAE today, all mainland private-sector employees must be on fixed-term (limited) contracts. “Unlimited” contracts were phased out by 31 December 2023. Employers and employees can now agree on any contract length, provided termination rules (30–90 days’ notice) and statutory end-of-service (EOS) benefits are followed. In financial free zones such as DIFC and ADGM, different rules apply, with DIFC using the DEWS savings scheme instead of EOS.
The Shift From Unlimited to Limited Contracts
The UAE’s employment landscape has changed dramatically over the past three years. Previously, the choice was between limited and unlimited contracts. Now, there is only one single model for the mainland: the fixed-term contract. Understanding why unlimited contracts were phased out—and how this shift affects your hiring strategy—is the first step in navigating compliance.
- Since 2 February 2022, under the provisions of the Federal Decree-Law No. 33 of 2021, every new employment agreement must be fixed-term.
- Employers were given until 31 December 2023 to convert legacy unlimited contracts into fixed-term agreements.
- In October 2022, the previous three-year limit on contracts was removed. Now, it can last for any agreed length.
What exactly is a fixed-term contract in the UAE?
Before exploring the practical implications, it is worth clearly defining what a fixed-term contract is under UAE law. While simple in structure, these contracts set clear rules concerning duration, termination, and benefits.
A fixed-term contract (sometimes called a “limited contract”) includes:
- A specified start and end date, with renewal by agreement.
- Termination provisions requiring 30–90 days’ notice and a legitimate reason.
- Probation period (maximum six months), wage protection, and EOS gratuity rules.
- Clear label under one of the six work models (full-time, part-time, temporary, flexible, remote, or job-sharing) set by the Ministry of Human Resources and Emiratisation (MOHRE).
Fixed-Term Contracts: Pros and Cons
Like any employment framework, fixed-term contracts have both advantages and challenges. For employers, they provide flexibility and certainty, but they also require close administrative oversight. For employees, they offer clearer benefits and security, yet renewal processes can cause uncertainty. A diagram below shows an overview:
Advantages for employers and employees:
- Flexibility: Contract length tailored to project or role.
- Clear rules for leaving the job: 30–90 day notice periods bring predictability.
- End-of-service benefits (EOSB): Resignation no longer cuts off EOS benefits.
Challenges:
- Tracking expiry dates of contracts: That’s the job of employers.
- Old templates: “unlimited” or “3-year maximum” clauses.
- Jurisdictional complexity: DIFC and ADGM operate under different frameworks.
Mainland vs. Free Zones: Key Differences
While on the mainland, all employment issues are controlled by MOHRE; not all UAE jurisdictions follow the same rules. Employers have to be aware whether they are operating on the mainland, in a general free zone, or in a financial free zone such as DIFC or ADGM. The differences can be significant—particularly when it comes to end-of-service benefits and contract types. The following table illustrates these differences:
- Mainland UAE: All contracts are fixed-term, with EOS benefits calculated under Article 51.
- Dubai International Financial Centre (DIFC): It follows its own DIFC Employment Law. It replaces EOS with the DEWS savings scheme. In this system, employers pay a monthly contribution (around 5.83%–8.33% of salary) into an employee’s savings account.
- Abu Dhabi Global Market (ADGM): Uses ADGM Employment Regulations 2024. Unlimited contracts are still allowed, with specific rules on notice, leave, and benefits.
How to draft the UAE Employment Contract
If your company is new in the UAE, writing a legal contract can be difficult. You need to make sure every part of it follows the rules of the place where you’re operating. This helps avoid problems later. The following step-by-step guide simplifies the process and ensures your contract is both lawful and practical.
- Check your location (mainland, free zone, or DIFC/ADGM).
- Select the work model (full-time, part-time, temporary, flexible, etc.).
- Set contract duration (no legal cap; align with role/project).
- Include in the contracts the probation period of a maximum of six months.
- Define termination (legitimate reason, 30–90 days’ notice, job-search leave if employer ends the contract).
- Make sure the contract includes salary breakdown, EOS or DEWS contributions, and health insurance.
- Ensure the contract is written in two languages (Arabic prevails in a dispute).
- Register the contract in MOHRE or the relevant free zone authority.
Why Do You Need Auxilium?
Expanding into the UAE can feel overwhelming — but Auxilium makes it simple. Auxilium has over 20 years of in-market expertise supporting global companies expanding into the UAE and wider GCC. As an award-winning Employer of Record, Auxilium ensures:
- Preparing contracts that fully comply with local laws.
- Onboarding new hires quickly, even when visa quotas or licences create hurdles.
- Managing payroll the right way — via WPS on the mainland or DEWS in DIFC.
- Handling the full process, from contracts and visas to end-of-service benefits.
Auxilium gives you the legal know-how no matter if you are hiring only one employee or a regional team.Book a free consultation with Auxilium today.
