The United Arab Emirates (UAE) has made a significant alteration to its labor legislations, mandating employers operating in the UAE to transition their existing contracts with employees that are not already on fixed-term to fixed-term contracts by December 31, 2023. This change is driven by the Federal Decree Law No. 33 of 2021, which has been amended and went into effect on February 2, 2022.
This new labour law, as it’s formally referred to, ushers in a major shift in employment contracts. It imposes a crucial obligation on all UAE employers, with a notable exception being employers in the Dubai International Financial Centre and Abu Dhabi Global Markets.
The change in the legislation aims at bringing about a sense of job security and stability among employees while allowing employers to better plan for their future workforce needs. The law, considered to mark a significant transformation in the UAE’s labor market, brings the nation’s employment law more closely in line with international practices. Where open-ended contracts were the norm, the legislation is shifting the labor market towards a model of fixed-length employment.
However, this legislation does not come without challenges. The switchover requires companies to redefine their employment or HR policies in keeping with the new law. This not only means extra work and adjustments for the HR departments, but for the corporations at a strategic level too, regarding workforce planning and budgeting.
As the deadline for this transition approaches, businesses operating in the UAE would be well-advised to start early in getting their HR policies and procedures in-line with these new legal requirements. Proper implementation of these fixed-term contracts will necessitate a thorough review of existing contracts, understanding of the new legal provisions, and subsequent modifications to the contracts to ensure compliance.
While a notable shift in labor market policy, this amended law works towards a balanced ecosystem where both employer and employee interests are maintained under a structured fixed-term model.