UAE: New employment updates – Fixed-term contracts and launch of unemployment insurance

The UAE has recently announced the removal of the three year cap on the length of fixed-term employment contracts and the launch of an unemployment insurance scheme for employees in the UAE.

Removal of three year cap on fixed-term employment contracts

A new directive has been issued by the UAE government which removes the three year cap on the duration of fixed-term employment contracts under the UAE Labour Law (UAE Federal Decree Law No. 33 of 2021 on the regulation of labour relations in the private sector).

Based on the new amendments, a fixed-term contract must be of a limited term but there will no longer be any restriction imposed on the length of that term. It is therefore now possible for an employer and employee to agree a fixed-term contract between them of any duration.

The amendment relates to the duration of fixed-term contracts only and the requirement, in the UAE Labour Law, for employers to transition all employees currently on unlimited term contracts to fixed-term contracts by 1 February 2023, remains unchanged. If you would like our help with this, as well as support in reviewing and updating your policies and procedures to ensure your UAE business is operating in compliance with the UAE Labour Law, please do get in touch.

Launch of unemployment insurance scheme in UAE

The UAE has launched an unemployment insurance scheme as part of reforms aimed at attracting more talent and investment to the region.

The new scheme, which was originally announced in May 2022, offers compensation for up to three months for insured public and private sector employees who lose their jobs. Employees will pay a premium (of between AED 40 and AED 100 (USD 10.90 to USD 27.23) annually) into an insurance scheme to be eligible.

Unemployed individuals will be able to claim 60% of their base salary, or up to AED 20,000 per month (USD 5,446), if they meet certain conditions under the scheme. The new scheme will provide a safety net for employees within the UAE and covers both UAE nationals and expatriates.

The launch of this social security system by the UAE also brings it in line with other Gulf countries – Saudi Arabia, Oman, Qatar and Kuwait have previously provided a form of unemployment support to citizens. Bahrain also has a form of unemployment insurance for resident non-citizen workers and citizens.

Please get in touch with our MDR ONE team if we can help with providing any further details on the above or providing you with employment support for your UAE business.


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