ONLY LIMITED CONTRACTS UNDER THE NEW FEDERAL LABOUR LAW NO 33 FOR THE YEAR 2021
The most significant change that happened according to THE NEW FEDERAL LABOUR LAW NO 33 of the YEAR 2021 is removing the unlimited employment contract and stipulating only a limited employment contract.
THE TERM OF THE LIMITED CONTRACT
In accordance with Federal Decree-Law No. (33) of 2021 regarding the regulation of labor relations, the “UAE Labor Law,” which entered into force as of February 2, 2022, the employment contract is concluded for a specified period, not exceeding (3) three years, the employer and the employee may, by agreement, extend or renew this contract for another similar period or for a shorter period, one or more times.
Suppose the employer and the employee continue to implement the contract after its original limited period expires without an express agreement. In that case, the original contract shall be considered to be extended to the same previous period under the same conditions stated therein.
On 15th September 2022, federal decree No. 14 of 2022, amending certain provisions of federal decree law No. 33 of 2021 on the regulation of labor relations, was issued, amending article 3/8 of the law relating to the term of the limited contract by removing the specified maximum period of 3 years of the limited contract and making the term of the contract with no limit up. This amendment stipulated that “the employment contract shall be concluded for a fixed period, subject to renewal, as agreed upon by the parties.” This amendment means that employers and employees are allowed to enter into an employment contract for 10 or 15 years If they so desire.
MAIN DIFFERENCES BETWEEN THE LIMITED AND UNLIMITED CONTRACTS
Nothing has been changed regarding the calculation method of the end of service. It is still the same, i.e. (Salary of 21 days of the basic salary for each year of the first 5 years of the employee service) and (Salary of 30 days of the basic salary for each year after the five years) and the (total not to exceed the value of 2 years of the total salary).
THE TERM OF MULTIPLE CONTRACTS DEEMED ONE PERIOD FOR THE PURPOSE OF CALCULATING THE END-OF-SERVICE COMPENSATION
In the event of extending or renewing the limited contract, the new period or periods shall be considered an extension of the original period. They shall be added to it in calculating the employee’s continuous service period for the purposes of calculating end-of-service benefits compensation.
The service of the employee with the same employer shall be calculated as one period. (No matter how many contracts were renewed and signed between the employee and employer, before or after the new law’s effective date or after, Limited or unlimited.
For example, if an employee worked for 10 years with an employer, and these 10 years were as follows:
- First 5 years through unlimited contract. During the effective of the previous cancelled law.
- Then, 3 years through a limited contract. Under the current labor law No 33-year 2012.
- Then, 2 years through another limited contract. Under the current labor law No 33-year 2012.
The total years of service in such cases will be 10 years. Accordingly, the calculation will be based on the total term of the service, which is 10 years. And the end-of-service compensation will be the total salaries of 21 days of the basic salary for each year of the first 5 years and the total salaries of 30 days of the basic salary for each year of the remaining 5 years.
WHAT HAPPENS AT THE EXPIRY DATE OF THE LIMITED CONTRACT
At the end date of the limited contract, if parties continue doing their obligations without renewing the contract, it will be considered renewed automatically for the same period and with the same terms and conditions.
If any party has the intention not to renew the contract, whether employee or employer, such party must notify the other party with the intention of not renewing the contract. The period of such notification should be the same as the notice period mentioned in the employment contract, which is a minimum of 1 month and a maximum of 3 months.
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