Understanding Limited vs. Unlimited Contracts: What Are the Differences and Notice Periods?

Hi,

I'm confused about Limited & Unlimited contracts. Could anyone define that for me? Could you also tell me what the notice period is for both of these? I keep hearing different explanations but I'm not sure which one is correct.

Limited Contract

It will be for a specified period, say, 3 years. You should complete the entire contractual period; only then will you be entitled to the gratuity. In case you have to resign, you should pay one and a half months' salary to the employer or the remaining period's salary, whichever is less.

Unlimited Contract

This is for an unlimited period, and you can resign by giving one month's notice. The gratuity will be based as follows:
- More than 1 year but less than 3 years: 7 days of basic salary as gratuity.
- More than 3 years but less than 5 years: 14 days of basic salary as gratuity.
- Completed 5 years: 21 days of basic salary.
- More than 6 years: For the first 5 years, 21 days of basic salary; from the sixth year onwards, 30 days of basic salary as gratuity.

Hi Lizancy,

I have 2 years of experience as an HR generalist. Would it be helpful if you could clarify the following:

Can I work in the UAE (Dubai) if I go there on a dependent visa? Will there be any difference in compensation if working on a dependent visa or a self visa? Also, please let me know if a couple can survive on 7000 AED if accommodation is provided by the company.

Regards, Chand

Hi Lizancy,

In the limited contract, you have mentioned, "It will be for a specified period, say 3 years." You should complete the entire contractual period; only then will you be entitled to the gratuity. In case you have to resign, you should pay one and a half months' salary to the employer or the remaining period's salary, whichever is less.

My question is, after paying one and a half months' salary to the employer or the remaining period of salary, is it certain that I can get an NOC from my employer?

Dear All,

Whether you pay the specified amount to be released early from a limited contract, it still depends on your management's approval to provide you with a No Objection Certificate (NOC). It solely depends on the management's decision, and you cannot force them to issue an NOC.

Another important point is that gratuity is applicable to all employees, whether you are under the company's sponsorship, your father's sponsorship, or your husband's sponsorship. If you are working for them, you are certainly entitled to receive gratuity.

Take care,
Liz

Dear All,

A document has been attached which will give you an understanding of Limited & Unlimited Contracts. This is an updated page from the UAE Labor Law.

Hope this would be of some help to you.

Best Regards,
Vilna

Dear Vilna,

Can you please send any links to the updated UAE Labour Laws, as well as the articles regarding Visa and Immigration laws?

Thank you in anticipation.

Liz

Dear Liz,

This is the usual extract of law that I refer to. Any changes to the same can be referred to online.

Regards,
Vilna

Employees under limited contracts are eligible for gratuity only upon completion of 5 years of service.

Employees under unlimited contracts are eligible for gratuity upon completion of 1 year of service if the employee resigns voluntarily. If an employee is terminated, gratuity is calculated pro rata for the fraction of the year.

Vilna,

The PDF file on limited and unlimited employment contracts could not be opened as it shows an error. Can you please repost the said file.

Vilna,

Neither could I open the PDF file on limited and unlimited employment contracts as it shows an error. Could you please repost the said file?

Thank you.

Hi, sir,

My contract is unlimited, and I have been working for more than 3 years now. If I resign from my company, will there be any ban on me? A 6-month or 3-month ban? Please help me.

Contract Duration Clarification

My contract states: Period of Contract: Three Years and further renewable. I would take that as being an unlimited contract. Can somebody confirm this?

I have just been released by the company after 20 months of employment. I was given 1 month's notice (which I am not required to work). Would I expect 3 months of compensation plus full gratuity (21 days)?

Hi folks, I have a query on Gratuity payment on Limited contracts - as quoted, if a person resigns before completing 5 years on a limited contract, he/she is not eligible for gratuity. The same law also states that limited contracts are only for a maximum period of 4 years, so after that, does it become unlimited?

So if it's unlimited, then after completing 4 years, an employee should get 21 days' salary and not zero gratuity. Normal practice in most companies is to renew the contracts every 3 years, and the labor simply stamps on the old contract, extending it for 3 years (with no specified period). If that is the case, then is it still a limited contract or an unlimited contract?

Someone, please clarify my query.

Thank you & Regards,
Jessie J

Hi, my friend is working in a Dubai company with an unlimited contract since January 2010. What are the bans and compensation he will face if he resigns now with a 1-month notice (i.e., before completion of one year)?

Attached is the complete abstract of the UAE Labour Law for your reference.

Thanks and Regards,
Narayanan Kutty

Dear All,

Types of Contracts in UAE Labor Law

According to labor law in the UAE, there are two types of contracts:

1. Limited
2. Unlimited

Limited Contract

In a limited contract, it is for a stipulated period of time. For example, it can be for 2 years, 3 years, or a maximum of 4 years. If you break the contract in between, you have to pay 45 days' salary to the employer if the employee is breaking it, and if the employer is breaking (termination), 2 months' salary plus the number of days' salary mentioned in the contract for the notice period.

The contract is renewable, say after 2 years, 3 years, or 4 years as mentioned in your contract. If you serve for more than 5 years (e.g., a 3-year limited contract in the first period and a 2-year period in the next tenure of 3 years), you are eligible for gratuity as per UAE labor law, but you will face a ban of six months since the contract is broken.

Unlimited Contract

It is for an unlimited period, for example, from 21.09.2010 to... Every 3 years, you have to renew your labor card, but not your labor contract. If you break the contract before three years, you are entitled to gratuity for 7 days, 14 days, 21 days, 30 days, etc., depending on your service period, but you will face a ban for six months. One more thing, this 7 days, 14 days gratuity is the minimum amount the company has to pay; if they are kind enough and wealthy, they can pay up to 21 or 30 days (how sweet!).

If you serve the company for more than 3 years in an unlimited contract, for example, 3.6 years, you will not face a ban (if you resign), but if terminated, you will get a salary only for the notice period mentioned in the contract (say 30 days, 45 days, 60 days, 90 days).

If I am wrong, please guide me.

Regards,
Suresh

I have been working at the company for the last 4 years and 4 months under a limited contract. I want to resign from my job due to family problems. Could you please clarify if any fine is applicable to me, and what about the gratuity?

I'm an Indian working in a restaurant. I have a limited contract for 3 years, which will expire on 07/08/13. I have successfully completed 2 years, but there is still 1 year remaining. Will there be any ban if I break my contract to opt for a new job? Please help me!

Please help me. If a limited contract finishes as per the specified period of 2 years, is the employee entitled to 21 days per year, totaling 42 days, less any absences? Please clarify.

Thanks.

If a limited contract of 2 years is completed by an employee, they are entitled to 21 days of gratuity per year, which totals 42 days, less any absences as per the law.

Yes, for a limited contract, when the employee completes the term specified in the contract, they are entitled to full gratuity, which amounts to 21 days for each year. Therefore, the total gratuity would be 42 days.