The Labour Law, which first came into force in February 2022, required employers to ensure that all private sector employees were given fixed-term contracts of up to three years. The change comes after some UAE businesses expressed concerns that the three-year cap could make it more difficult for them to attract and retain talent.
Federal Decree Law No.14 of 2022, issued last month, removed the three-year cap, enabling employers to agree the duration of fixed-term contracts with their employees. But thousands of employers have already updated employment contracts to comply with the original three-year cap.
Luke Tapp of Pinsent Masons said: “Employers who have already updated their employment contracts might want to consider including an auto renewal clause so that the contract does not automatically expire on the end date. They could also extend the term of their fixed-term contracts or simply maintain the status quo of a three-year fixed-term contract without an auto-renewal clause.”
Meanwhile, an earlier amendment to the UAE Labour Law introduced a new unemployment insurance scheme. Individuals subscribed to the scheme for at least one year will be able to receive income protection in certain circumstances following the termination of their employment. The income protection is capped at AED 20,000 (approx. US$5,500) per month for a period of three months from the start of their unemployment.
Ruth Stephen of Pinsent Masons said: “The full details of the scheme are yet to be released, but it is expected that it will come into operation in 2023 and that insurance premiums will most likely be deducted from the employees’ salaries by their employers. Firms should continue to monitor any developments relating to the unemployment insurance scheme over the next few months to ensure that they are prepared for its eventual implementation.”
Employers have until 1 February 2023 to ensure that all their employees have been transitioned onto fixed-term employment contracts that are compliant with the UAE’s Labour Law.