Title: UAE Employment Contract Types Explained – Limited vs Unlimited (2025)
Focus Keyword: employment contract types uae
Meta Title: Employment Contract Types UAE: Limited vs Unlimited (2025)
Meta Description: Confused about employment contract types in UAE? Learn the difference between limited and unlimited contracts as per 2025 labour law updates.
UAE Employment Contract Types Explained – Limited vs Unlimited (2025)
If you’re working or planning to work in the UAE in 2025, understanding the employment contract types in UAE is essential. Your contract defines everything from your job duration and resignation notice period to end-of-service benefits and legal rights.
The UAE Labour Law recognizes two main types of employment contracts:
Limited Contract
Unlimited Contract
This guide breaks down the key differences, benefits, and legal implications of both types under the updated 2025 labour law.
✅ What Is an Employment Contract in the UAE?
An employment contract in the UAE is a legally binding agreement between an employer and an employee that outlines:
Job role and responsibilities
Salary and benefits
Contract duration
Termination clauses
Leave entitlements
Working hours and location
All contracts in the private sector are regulated by the UAE Labour Law – Federal Decree Law No. 33 of 2021 and are registered with MOHRE (Ministry of Human Resources and Emiratisation).
📘 What Are the Employment Contract Types in UAE?
As of 2023 and reaffirmed in 2025, only one type of contract is recognized by MOHRE: the limited-term contract (also known as fixed-term). The unlimited contract has been phased out gradually since 2022.
However, understanding the historical difference between the two is still important—especially for those transitioning from older contracts.
🔹 1. Limited Contract (Fixed-Term)
A limited contract is signed for a specific period of time—usually up to 3 years, renewable by mutual consent.
Key Features:
Defined start and end date
Auto-termination at the end of the contract unless renewed
Resignation requires 30 days’ notice
Early termination by employee may lead to compensation to employer
Gratuity is calculated based on full service period if completed
Best For:
Project-based jobs
Temporary roles
Contractual positions (education, construction, consultancy)
Employer Advantage:
Better control over contract duration
Easier to plan workforce turnover
🔹 2. Unlimited Contract (Phased Out)
Previously, an unlimited contract had no fixed end date and offered more flexibility for both parties. It could be terminated by either party with valid reason and proper notice.
Key Features:
No end date
Flexible resignation or termination with notice period
Still recognized in older or free zone contracts
Transition Note:
From 2022 onward, MOHRE mandated conversion of all unlimited contracts to limited ones. However, some employees in free zones or public sectors may still hold unlimited contracts under transition.
⚖️ Limited vs Unlimited Contracts: Key Differences (2025)
| Feature | Limited Contract | Unlimited Contract (Old) |
|---|---|---|
| Duration | Fixed (max 3 years) | Open-ended |
| Termination | At end date or mutual | Flexible with notice |
| Early Resignation | May require compensation | Allowed with notice |
| Legal Status | Legally mandated | Phased out |
| Gratuity | Full if contract completed | Based on years served |
| Notice Period | Usually 30 days | 30 to 90 days |
📄 What’s the New MOHRE Requirement in 2025?
MOHRE mandates that all employment contracts in UAE must now be limited-term, with a duration not exceeding 3 years, though renewable.
Reference: UAE Labour Law Article 8
This was implemented to standardize employment terms and protect both employers and employees from indefinite obligations.
👣 How to Check or Change Your Contract Type
✅ For Employees:
Log in to your MOHRE account or MOHRE mobile app
Download your official labour contract
Look under the “contract duration” section
If you’re on an unlimited contract, your employer is required to convert it into a limited one upon renewal or by government deadline.
✅ For Employers:
Review all legacy contracts with your PRO or legal advisor
Update expired unlimited contracts to comply with MOHRE rules
Ensure employees are informed and sign updated contracts
🧠 Pros and Cons of Limited Contracts in 2025
👍 Advantages:
Clear timelines and expectations
Easier to manage contract renewals
Legally protected structure
👎 Disadvantages:
May not suit employees seeking long-term roles
Early resignation may result in compensation liabilities
💬 FAQs – Employment Contract Types UAE
Q: Is it legal to still have an unlimited contract in 2025?
No, unless it’s under a free zone or special jurisdiction not fully transitioned yet. MOHRE requires all contracts to be limited.
Q: Can a limited contract be terminated early?
Yes, but compensation may apply based on Article 43 of the Labour Law unless termination is due to mutual agreement or just cause.
Q: What happens if I refuse to switch to a limited contract?
Your employment may not be renewed, or MOHRE may refuse to process other work-related requests. It’s mandatory.
🧾 Gratuity Calculation Differences
Even under limited contracts, employees are still entitled to end-of-service gratuity if they complete at least one year of continuous service.
Formula (Same for Both):
First 5 years: 21 days’ basic wage per year
After 5 years: 30 days’ wage per year
Early resignation may reduce gratuity if conditions of early exit are not met.
Final Thoughts
Understanding the employment contract types in UAE is crucial for making informed career decisions in 2025. With the phasing out of unlimited contracts, all workers in the private sector must now sign a limited-term contract—with clear terms on duration, notice, and benefits.
Whether you’re signing a new job offer or renewing an old contract, make sure you read and understand the terms. When in doubt, always consult HR or legal support to avoid misunderstandings or legal disputes.
Need Help With UAE Contracts?
At MahadHRC, we offer full HR contract services, from drafting compliant contracts to handling renewals and legal consultations. Visit MahadHRC.ae to get started today.
📌 Categories:
UAE Labour Law 2025, Employment Contracts, HR Compliance, Work in UAE, Employee Guide
🏷️ Tags:
employment contract types UAE, limited contract UAE, UAE labour contract 2025, MOHRE contract rules, Mahad HRC
Image Prompt (1000×667):
A UAE HR executive showing two types of employment contracts (limited and unlimited) on printed documents to a new employee seated at an office desk. A MOHRE portal screen is visible in the background.