Understanding The Termination of Employment Contracts in the UAE

The details of employment contract termination in the UAE aren’t straightforward, and it’s true for both employers and employees. 

We understand that this process is filled with complexities, legalities, and paperwork that can leave anybody feeling overwhelmed and clueless. Not knowing only adds to the worry because you don’t want to be penalized for non-compliance. 

For your convenience, we have prepared a comprehensive guide to shed light on the termination of employment contracts in the UAE, helping you understand the nuances in a way that’s easily understood by all. Ultimately, our goal is to ensure a smooth transition for all parties involved.

What Are The Different Types Of Employment Contracts?

Before we can discuss the subject of termination in detail, it’s essential to have a basic understanding of the two main types of employment contracts in the UAE. 

1. Limited Contract – Such a contract has a specified fixed start and end date, typically lasting for two years. It comes with a notice period, which can range from one to three months. Renewing a limited contract requires mutual agreement between the employer and employee.
   
2. Unlimited Contract – In an unlimited contract, there is no predefined end date. Termination occurs when both parties mutually agree, and the notice period is similar to that of limited contracts. One party can terminate the contract as long as they adhere to the notice period and legal requirements.

How Does The UAE Termination Process In A Limited Employment Contract Look Like?

Labour law on termination of employment in a limited contract can happen in several ways. Let’s take a look at them –

• Natural Expiry– When the contract concludes and is not renewed by both parties or when both parties agree to end it before the agreed end date.
• Violation of Contract– Termination can result from either the employer or employee committing a violation, as outlined in Article 120 of the UAE Labour Law. Both parties have the right to terminate the contract, provided they meet legal requirements, including – 

1. Providing written notice at least one month in advance (not exceeding three months).
2. Offering compensation, not exceeding three months' gross wages, as previously agreed.
3. Fulfilling contract obligations during the notice period.

• Termination Due to Mutual Agreement– A limited contract can also be terminated through the mutual consent of both parties. This flexibility is a crucial aspect of limited contracts, allowing employers and employees to part ways amicably if circumstances change.
• Termination Due to Breach of Contract– When one party fails to uphold their contractual obligations, the other party may choose to terminate the contract. It includes instances where the employer does not provide the agreed-upon working conditions or the employee fails to fulfil their job responsibilities.

How Does The UAE Termination Process In An Unlimited Employment Contract Look Like?

In the case of an unlimited contract, termination relies on mutual agreement. The notice period and the process are similar to limited contracts, and adhering to the legal requirements is absolutely essential.

Termination Of UAE Employment Contract Without Notice By The Employer

Employers in the UAE can terminate an employment contract without the employee's consent or notice in certain circumstances, such as – 

• Dismissing an employee during or at the end of the probation period- During the probation period, employers have the flexibility to assess the employee's suitability for the role. If they find that the employee is not a good fit, they can terminate the contract without notice.
• Employee violating workplace safety rules- Employers have a responsibility to maintain a safe working environment. If an employee repeatedly ignores safety guidelines or instructions, the employer can terminate the contract without notice to ensure a secure workplace.
• Employee submitting false certificates or identity- Misrepresenting qualifications or identity is a breach of trust. Employers can take immediate action if they discover an employee has submitted false documents.
• Employee's significant errors causing substantial losses- Employers expect employees to perform their duties diligently. If an employee's actions result in substantial financial losses for the company, the employer has the right to terminate the contract without notice.
• Employee's unjustified absence- Consistent absence without lawful justification can disrupt business operations. Employers can terminate the contract without notice if an employee is absent for more than seven successive days or more than 20 intermittent days in a single year.
• Employee found under the influence of prohibited substances- Employee substance abuse can endanger the safety and productivity of the workplace. Employers have the authority to terminate the contract without notice if an employee is found under the influence of prohibited drugs or alcohol during working hours.
• Employee disclosing business secrets- Business confidentiality is essential to maintaining a competitive edge. If an employee divulges sensitive information that could harm the company's reputation or position, the employer can terminate the contract without notice.
• Employee committing assault- A workplace should be a safe environment. If an employee commits an act of assault against the employer or a colleague, the employer can terminate the contract without notice.
• Employee facing a court judgment- If a competent court awards a final judgment against the employee in question regarding an offense prejudicing honesty, honour, or public morals, the employer has grounds for terminating the contract without notice.
• Employee failing to perform basic duties- Employment contracts outline the responsibilities of the employee. If an employee consistently fails to perform these duties, the employer can terminate the contract without notice.
• Employee disregarding warnings- Employers may issue warnings to employees regarding their work performance or conduct. If an employee repeatedly ignores these warnings, the employer can terminate the contract without notice.

Termination Of UAE Employment Contract Without Notice By The Employee

Employees also have the option to terminate an employment contract without notice under certain circumstances, including – 

• Employer's failure to meet legal or contractual obligations- Employers have legal and contractual obligations to employees, including providing wages on time. If the employer fails to meet these obligations, such as not paying wages for 60 continuous days, the employee can terminate the contract without notice.
• Filing a court complaint against the employer for job insecurity- If an employee faces job insecurity due to factors like the business remaining inactive for more than two continuous months, they have the right to terminate the contract without notice.
• Winning a labour complaint- If the Ministry of Human Resources & Emiratisation refers a labour complaint to the labour court, and the final ruling goes in favour of the employee, they can terminate the contract without notice.

Ensure 100% Compliance With TASC Outsourcing

Understanding the process of terminating an employment contract in the UAE is no doubt a complex process. However, it’s important to remember that the complexity is there to protect both employers and employees, ultimately to ensure a fair and equitable work culture. 

At TASC, we are committed to providing expert guidance and reliable services for businesses and employers in the UAE. Whether you need support with recruitment, payroll services, or navigating employment contract termination, we are here to assist you every step of the way.

Get in touch with our experts now for 100% compliant HR and staffing solutions.