Difference Between Limited and Unlimited Contract in UAE Explained Clearly

In the UAE, the difference between limited and unlimited contract in UAE isn’t just legal term it shapes your job security, notice period, and end-of-service benefits. With recent labour law changes, it has phased out unlimited contracts; it’s more important than ever for both employees and employers to understand what contract type you’re on or being offered.

1. Introduction

The difference between limited and unlimited contract in UAE matters more than people think. It shapes your notice period, your exit options, your end-of-service benefits, and even how easily you can switch employers. But confusion often comes from outdated assumptions and the shift the UAE Labour Law made toward fixed-term contracts.

Focus on how each contract impacts your day-to-day reality and not just the legal text. Business professionals often skim the surface.

By the end of this article,you’ll not only understand what is difference between limited and unlimited contract in UAE, but also know which one actually works better for your career or company.

2. What a Limited Contract Really Means

• Duration and structure
  A limited contract also called a fixed-term contract in the UAE has a defined start and end date. According to MOHRE rules under the recent labour reforms, fixed-term contracts can run for up to three years, and they may be renewed for similar or shorter terms.
• Renewal rules
  When a fixed-term contract ends, both employer and employee can mutually agree to renew it. Also, extensions or renewals count as continuous service for calculating things like the end-of-service benefits.
• Termination conditions
  Even though a fixed-term contract ends automatically at expiry if it’s not renewed, either side you can terminate it earlier, but that may come with compensation. If you terminate before the contract ends, the law may require you or your employer to pay a portion of the remaining term.
• End-of-Service (EOS) calculation
  Under UAE law, your end-of-service gratuity or EOS benefit is calculated based on continuous service which includes any renewals of fixed-term contracts. Because renewals count toward your total service so you don’t lose prior years just because the original contract had a fixed term.

3. What an Unlimited Contract Means

• Open-ended nature- An unlimited contract doesn’t specify an end date. The employment relationship continues until either of you or your employer decides to end it.
• Flexibility for both sides- Because there’s no fixed end, there’s more room for flexibility also either party can terminate with notice, and there’s no automatic expiration.
• Termination rules- For unlimited contracts under the older regime, termination requires a notice period, typically ranging from 30 to 90 days, which depends on service length. If notice is not given, compensation in lieu of notice may be payable.
• End-of-Service (EOS) calculation- EOS benefits apply under unlimited contracts too. But historically, if an employee resigned early, the gratuity might be reduced which depends on how long they’d worked.

4. Key Differences at a Glance

Here’s a comparison of limited vs unlimited contract in UAE across important dimensions:

5. Which Contract Is Better for You?

Deciding which contract is better depends on goals, job type, and risk tolerance.

• Limited contract makes sense if: If you get hired for a project or short-term role like consulting, construction & seasonal work, also if the employer wants flexibility and control over the term with contract renewal cycles
  
• Unlimited contract (legacy) may have been preferred if: You wanted job stability and permanence, also if you expected long-term employment without renegotiating every few years. But know that because of legal changes, unlimited contracts are being phased out.

6. How the UAE Labour Law Treats Both Contracts (Post-2022 Updates)

Under the new Federal Labour Law (Decree-Law No. 33 of 2021), the landscape changed unlimited-term contracts have been largely phased out. Now, most private-sector employees must be employed on fixed-term contracts of a maximum of 3 years, with all renewals allowed.

If you were on an unlimited contract before, your employer was required to convert your contract to a limited-term one by February 2023. Importantly, while converting, your continuous service is not reset & it still counts for EOS benefits.

Also, minimum notice periods for terminations now depend on how long you’ve worked:

• 30 days if service < 5 years
  
• 60 days if > 5 years
  
• 90 days if > 10 years

7. FAQs

Notice period for limited vs unlimited?
Limited follows the agreed 30-90 days, while old unlimited uses 30, 60, or 90 days based on service.

Can a limited contract be terminated early?
Yes, but early termination can trigger compensation.

Do both offer the same EOS benefits?
Yes, under the new law, though older unlimited contracts may differ on resignation.

8. Final Thoughts

Understanding the difference between limited and unlimited contract in UAE it is no longer just a legal phrase but it’s practical. Whether you’re joining a company, renewing your agreement, or moving from one job to another, knowing which contract type applies helps you to navigate your rights, benefits, and future more confidently.

If you’re an employer, make sure your contracts are up to date and compliant with the new labour law. If you’re an employee, check your contract, understand its terms, and ask for clarity where you need it. That way, you can make choices that serve both your career goals and your legal rights.