Types of Employment Contracts in Dubai

Dubai recognizes the following types of employment contracts:

1. Fixed-Term Contracts: Contracts with a specified duration (not exceeding 3 years), which may be renewed or converted to a new fixed-term contract.
2. Unlimited-Term Contracts: These contracts were replaced by fixed-term contracts under Federal Decree-Law No. 33 of 2021, but legacy contracts may still exist under older provisions.

💡 Pro Tip: Clearly define the type and duration of the contract in the offer letter and employment contract. This ensures alignment with Dubai labor laws and reduces the risk of disputes.

Grounds for Employment Termination in Dubai

• Mutual Agreement (Article 42): Both employer and employee can agree to terminate the employment contract at any time.
• Completion of Contract (Article 42): The contract automatically ends when its specified term expires unless both parties agree to renew it.
• Employer-Initiated Termination (With Notice) (Article 42 & 43): An employer may terminate a worker’s contract by giving 30 to 90 days’ notice. The notice period must be paid unless agreed otherwise.

• Employer-Initiated Termination (Without Notice) (Article 44):

• Employers may terminate employees without notice if any of the following conditions are met:
  1. Fraud or Forgery: The worker submits forged certificates or documents.
  2. Gross Misconduct: The employee’s actions cause significant loss or damage to the employer’s property.
  3. Safety Violations: The worker breaches workplace safety rules after being informed.
  4. Repeated Poor Performance: The worker repeatedly fails to meet performance standards despite two formal warnings.
  5. Breach of Confidentiality: Disclosure of trade secrets or sensitive information.
  6. Substance Abuse: The worker is intoxicated at work or under the influence of drugs.
  7. Physical Assault: Assault of employer, manager, or colleagues.
  8. Unauthorized Absence: Absent from work for 7 consecutive days or 20 intermittent days without justification.
  9. Illegal Use of Position: Worker exploits their position for personal gain.
  10. Illegal Dual Employment: The worker works for another employer without following legal protocols.

• Employee-Initiated Termination (Without Notice) (Article 45):

• An employee can leave the job without notice if:
  1. Employer Breach: The employer breaches their obligations (e.g., non-payment of wages) and fails to rectify the issue within 14 days.
  2. Workplace Harassment or Assault: The employer or representative assaults or harasses the worker.
  3. Unsafe Work Conditions: Serious health or safety risks exist at the workplace.

💡 Pro Tip: If an employee leaves without valid cause, they may face a 1-year work ban (Article 50). Employers should document absences thoroughly to prevent wrongful claims.

Notice Period Requirements (Article 43)

• Minimum Notice Period: 30 days.
• Maximum Notice Period: 90 days.
• Employer’s Obligations: If the employer wishes to terminate an employee, they must continue to pay wages throughout the notice period unless agreed otherwise.
• Employee’s Rights: If the employer terminates the contract, the employee can take 1 day off per week during the notice period to search for a new job.

💡 Pro Tip: If either party fails to provide the required notice, the non-complying party must pay the other party compensation equal to the wage for the notice period.

End-of-Service Benefits (Gratuity) (Article 51)

When an employee’s service ends, they are entitled to an end-of-service gratuity calculated as follows:

1. 21 days’ basic wage for each of the first 5 years of service.
2. 30 days’ basic wage for each additional year beyond 5 years.
3. The total gratuity is capped at 2 years’ total wage.

💡 Pro Tip: To avoid miscalculations, use a payroll management system or work with an EOR like Globaine to ensure gratuity is calculated correctly.

Employer’s Obligations During Termination (Article 53)

1. Final Payment: Employers must pay all outstanding wages and entitlements, including gratuity, within 14 days from the end of the contract.
2. Experience Certificate: Upon request, employers must provide a certificate of service to the employee.
3. Repatriation Costs: Employers are responsible for the cost of returning the employee to their home country unless the worker finds a new employer.
4. Unlawful Termination: If an employer terminates an employee for filing a complaint with MoHRE or for exercising their legal rights, this is deemed unlawful. In such cases, the employee may receive up to 3 months’ compensation (Article 47).

Severance Pay Calculation Example

💡 Pro Tip: Ensure gratuity is calculated on the basic wage (excluding bonuses, allowances, or commissions) as required by Dubai labor law.

How an Employer of Record (EOR) Can Help

Terminating an employee in Dubai requires precise compliance with Federal Decree-Law No. 33 of 2021. An EOR like Globaine can help businesses navigate the complexities, including:

• Compliance Management: Ensure compliance with Dubai labor laws, avoiding fines and disputes.
• Documentation Support: Properly document notice letters, warnings, and termination forms.
• Gratuity Calculations: Calculate end-of-service benefits accurately.
• Legal Support: Ensure termination is lawful and defensible in labor disputes.