HR & Labour10 Aug 2026 · 6 min read · explainer

UAE Limited vs Unlimited Contracts

The current UAE position on limited versus unlimited contracts, the 2022 fixed-term reform, removal of the three-year cap, renewal, and exit rules.

Under the current federal UAE Labour Law, private-sector employment contracts are fixed-term, also called limited or specified-term contracts. The old unlimited-contract category was abolished when Federal Decree-Law No. 33 of 2021 took effect on 2 February 2022. Article 8 now requires a specified period agreed by both parties.

The crucial 2026 detail is that fixed-term does not mean a statutory maximum of three years. The original 2021 text used a three-year cap, but Federal Decree-Law No. 14 of 2022 amended Article 8(3). The current MOHRE consolidated text says the contract is for a specified period, renewable by agreement, and no longer states the three-year ceiling.

Current position at a glance

New federal private-sector contracts use a specified fixed term.
Article 8 no longer sets a three-year maximum term.
The parties may extend or renew the contract by agreement.
Renewed and extended periods count toward continuous service.
If both parties keep performing after expiry without an express new agreement, the original contract is treated as implicitly extended on the same conditions.
A fixed-term contract can still be ended during its term under Articles 42 and 43.

The employer must still use the approved MOHRE contract and keep the contract term aligned with the relevant work permit and administrative process. Removal of the Article 8 cap does not authorise an informal or permit-free arrangement.

Why some sources still say three years

Older articles, offer templates, and even pages that repeat the original 2021 wording may say a limited contract cannot exceed three years. That was the original Article 8 position. The September 2022 amendment replaced that clause with a specified period agreed by the parties.

For current decisions, use the consolidated law with its amendment note, not an unamended PDF or a legacy HR template. The official UAE employment-law overview correctly confirms that unlimited contracts were abolished, while the consolidated MOHRE Article 8 controls the current wording on duration.

Fixed term does not mean no early resignation

A common mistake is to treat the expiry date as the only possible exit. Article 42 allows termination at the request of either party when the statutory termination rules and contractual notice are followed. Article 43 allows either party to terminate for a legitimate reason with written notice, and the agreed ordinary notice must be at least 30 and no more than 90 days.

The employer does not automatically owe wages for every month remaining until expiry, and the worker is not automatically trapped until expiry. The actual consequences depend on the legal route, notice compliance, contract terms that remain valid, and any proven breach. Read UAE notice periods and resignation.

Expiry, renewal, and implied extension

Article 42(2) ends the contract when its fixed term expires unless it is extended or renewed. HR should review the term early enough to decide whether to renew and to complete the approved process. A contract can also contain a renewal-notification mechanism, which should be followed.

If employer and worker simply continue performing after expiry without an express agreement, Article 8(5) treats the original contract as implicitly extended on the same conditions. That is a legal backstop, not a good document-control process. Renew before expiry and give each party the approved copy.

Continuous service does not reset on renewal

Article 8(4) adds each extension or renewal to the original period for continuous-service calculations. Do not reset joining date, gratuity service, or qualifying leave service because a new fixed-term document was signed.

For example, three consecutive two-year contracts with the same employer can represent six years of continuous service, subject to the facts and any excluded periods. The gratuity calculation may therefore cross from the 21-day band into the 30-day band after five years. Check the UAE end-of-service gratuity rules and estimate with the UAE gratuity calculator.

Contract term and work pattern are different

Article 7 recognises full-time, part-time, temporary, and flexible work, with further models in the Executive Regulation. These describe how work is performed. Article 8's specified term describes how long the contract lasts.

A part-time contract is still fixed-term. A full-time contract is still fixed-term. Do not use "limited" as if it means part-time or temporary. The approved contract should identify both the work pattern and the term.

What to include in the contract

Article 10 of Cabinet Resolution No. 1 of 2022 lists principal terms including employer and worker details, start date, work and workplace, hours, rest days, probation if any, contract term, wage and allowances, annual leave, notice, and termination procedure. Additional clauses are permitted if they comply with the law.

Before signature, reconcile:

offer and MOHRE contract;
fixed term and permit process;
work pattern and normal hours;
basic wage, allowances, and total wage;
probation and ordinary notice;
annual leave and benefits; and
renewal and termination workflow.

The UAE salary calculator can help teams discuss the package structure, but the signed approved contract remains the source for payroll and legal inputs.

What happened to old unlimited contracts

The 2021 law created a transition from legacy unlimited contracts to fixed-term contracts. For an employer operating in 2026, the practical position is not to issue, renew, or rely on an unlimited contract under the federal regime. Review any legacy-labelled record against the current approved contract in MOHRE's system and preserve the worker's continuous service and accrued rights.

Do not erase old service or issue a false break in employment during conversion. Get MOHRE or legal guidance if the system record, signed documents, and actual working relationship disagree.

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Important note

Shabang is a UAE business and marketing partner, not a law firm. This guide is general information, not legal advice. Confirm legacy conversions, unusual permit terms, free-zone jurisdiction, and disputed early termination with MOHRE, the relevant authority, or qualified UAE legal counsel.