Termination of Unlimited Contract in UAE: Understanding the Legal Implications
The United Arab Emirates (UAE) is a popular destination for expats from various parts of the world, drawn by lucrative job opportunities, tax-free income, and a high standard of living. However, like any other country, the UAE has its own set of laws and regulations governing various aspects of life, including employment contracts.
One of the most common types of employment contracts in the UAE is the unlimited contract, which entitles both employers and employees to terminate the contract without any specific reason. However, this does not mean that the termination can be done without following the legally prescribed procedures.
Here is a guide to understanding the legal implications of the termination of unlimited contracts in the UAE.
Notice Period
The first thing that employers and employees need to be aware of is the notice period. According to UAE labor law, the notice period for terminating an unlimited contract is 30 days, which means that either party must give the other party 30 days` notice before terminating the contract.
If the employee fails to give notice, the employer has the right to deduct the equivalent of 30 days` pay from their final settlement. Similarly, if the employer does not provide the required notice, they are legally required to pay the employee an amount equivalent to 30 days` pay.
End of Service Benefits
Another important consideration for employees is their end of service benefits. When an employee`s unlimited contract is terminated, they are entitled to receive end of service benefits, which includes payment for unused annual leave, gratuity payment, and repatriation costs.
The gratuity payment is calculated based on the employee`s length of service and last drawn basic salary. For employees who have completed less than one year of service, they are entitled to receive a pro-rata gratuity payment. It is essential for both parties to understand their respective rights and obligations when it comes to end of service benefits.
Unfair Dismissal
While unlimited contracts allow for termination without cause, it is essential to note that there are certain circumstances where termination may be deemed unfair or arbitrary. A terminated employee who believes that their termination was unfair or arbitrary may file a complaint with the Ministry of Human Resources and Emiratisation within one year of their termination.
In such cases, the Ministry may order the reinstatement of the employee or award compensation equivalent to up to three months` salary. Employers must, therefore, ensure that they have justifiable reasons for terminating an employee`s contract to avoid any legal issues.
In Conclusion
Termination of an unlimited contract in the UAE must follow the legally prescribed procedures to avoid any legal implications. Employers and employees must understand their respective rights and obligations when it comes to notice periods, end of service benefits, and unfair dismissal.
It is always advisable for both parties to seek legal advice or consult the Ministry of Human Resources and Emiratisation before terminating an employment contract to ensure they are in compliance with UAE labor law.