KEY POINTS

  • The new law will allow employers to agree on a term with their employees
  • A decree seeking to remove three-year cap in limited contracts was also passed in October
  • The law is part of Abu Dhabi's efforts to transform its private sector work landscape

The deadline is fast approaching for private sector employers to comply with the new labor law that requires them to switch their workers to limited-term contracts. The Ministry of Human Resources and Emiratization has given companies until Feb. 1 to meet the new labor requirement.

The new law mandates all employers in the private sector to convert their employment contracts from unlimited term to limited-term by Feb. 1, Wednesday, unless they are in the Abu Dhabi Global Market and Dubai International Financial Free Zones. The law further exempts families who are employing domestic workers.

The government announced that businesses failing to convert their employment contracts to limited-term by Feb. 1 would be fined, although it hasn't been confirmed what the penalty would be.

The implementation of the new arrangement is part of the UAE's efforts to transform the country's private sector work landscape. It also aims to abolish a law that was first introduced in 1980, imposing the use of unlimited-term contracts in the private sector. With the new law, companies and their employees may agree on a part-time work setup and project-based tasks.

The law gained more momentum in October 2022, when a federal decree seeking to remove a planned three-year cap on contracts was passed, allowing employers to agree on a term with their employees. According to the Ministry of Human Resources, businesses that had already updated their contracts before the decree would need to do so again before Feb. 1.

It remains to be seen how the new law would impact the UAE's labor market. However, Dubai-based lawyer Shiraz Sethi urged businesses to adhere to the new requirement to avoid penalties. He also explained what the change would mean for the private sector work landscape.

"With the lifting of the cap of three years for a limited term contract, this arrangement more closely reflects an unlimited term employment contract than a truly fixed-term employment contract," he explained.

"Only time will tell how this new requirement will play out in practice and how it will impact the labor market in the UAE," he added.

A general view of the Abu Dhabi skyline
Reuters