- Are you being told to pay three months’ salary after resigning?
- Has your employer terminated you and you’re unsure whether it’s lawful?
- Are you confused about whether your limited contract automatically renews?
These are some of the most common and urgent employment questions in the UAE. Many employees and employers still rely on outdated rules from the old labour law, especially the widely searched “3 months’ salary on termination UAE” issue.
The reality is that the law has changed.
Under Federal Decree-Law No. 33 of 2021, all private-sector employment contracts are now fixed-term, and early termination rules operate differently from the previous regime under Federal Law No. 8 of 1980.
If your job, visa, gratuity, or compensation is at risk, understanding the current legal framework is critical.
What Is a Limited Contract in UAE?
As of 2026, all employment contracts in UAE mainland and most free zones — with the exception of DIFC and ADGM — must be limited-term agreements. Unlimited contracts have been fully abolished, and all existing employment arrangements have been transitioned to fixed-term, limited, or flexible contract structures.
A limited-term contract is a fixed-duration agreement that clearly defines a start and end date, typically for a period of up to three years.
Key Features of Limited-Term Contracts in 2026
- Fixed Duration: The contract must specify a definite term, generally not exceeding three years.
- Expiry and Renewal: The agreement automatically expires on its stated end date unless both parties formally agree in writing to renew or extend it.
- Implied Renewal: If the contract expires and the employee continues working without signing a new agreement, the contract is considered renewed under the same terms and conditions.
- Visa Connection: The employee’s residence visa is directly linked to the contract’s duration.
- Probation Period: The probation period cannot exceed six months and cannot be extended or renewed.
- Notice Period: Although the contract has a fixed expiry date, parties may agree to a notice period of 30 to 90 days in cases of early termination.
Legal Position Under UAE Labour Law
Under Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, which came into force on 2 February 2022:
• All private-sector employment contracts must be fixed-term.
• The maximum contract duration is generally three years (renewable).
• Unlimited contracts are no longer issued under the new law.
This represents a fundamental shift from the previous regime under Federal Law No. 8 of 1980.
Limited Contract Meaning in Practical Terms
In practical employment terms, a limited contract:
• Specifies a clear start and end date.
• May be renewed by mutual agreement.
• Ends automatically unless renewed.
• May trigger notice and compensation rules if terminated early.
The defining feature is certainty of duration.
Need your employment contract reviewed before resigning or terminating?
Our contract lawyers provide professional contract assessment and risk analysis.
Is Limited Contract Still Valid Under the New Labour Law?
Yes — but with an important clarification.
Before 2022, UAE labour law recognised two types of contracts:
- Limited contract (fixed-term)
- Unlimited contract (open-ended)
Under the current law, all employment contracts are fixed-term. Therefore:
• The concept of “limited contract” continues.
• The concept of “unlimited contract” has been abolished in the private sector.
Any contract signed or renewed after February 2022 must comply with the fixed-term structure.
Difference Between Limited and Unlimited Contract in UAE (Old Law vs New Law)
| Feature | Limited Contract (Old Law) | Unlimited Contract (Old Law) | Current Law (Post-2022) |
|---|---|---|---|
| Duration | Fixed period | No end date | All contracts fixed-term |
| Early Resignation | Compensation possible | Notice-based | Notice-based |
| Early Termination | Up to 3 months compensation | Notice-based | Notice-based |
| Expiry | Automatically ends | No expiry | Automatically ends |
| Legal Status | Valid | Valid | Unlimited abolished |
What Changed Under Federal Decree-Law No. 33 of 2021?
The new law introduced key reforms:
• Removal of unlimited contracts
• Standardisation of notice periods
• Clearer termination rules
• Stronger anti-discrimination protections
• Structured grievance process through MOHRE
Employers were required to convert existing unlimited contracts into fixed-term contracts within the legally prescribed transition period.
Failure to regularise contracts could expose companies to compliance risks.
What Is the Notice Period in UAE for Limited Contract?
Under the current law:
• Notice period for limited contracts must be between 30 and 90 days, unless otherwise agreed.
• Either party may terminate during the contract term by giving written notice.
• Notice obligations apply unless termination is justified under specific legal grounds.
The notice period must be expressly stated in the employment contract.
Speak with a UAE Labour & Employment Lawyer before taking action.
Can I Resign After 6 Months in a Limited Contract UAE?
Yes — but subject to notice.
Under the current labour law:
• An employee may resign during a fixed-term contract by serving contractual notice.
• Compensation clauses may apply if contract terms specifically provide for them.
• During probation, separate notice rules apply.
Resignation after six months does not automatically trigger “3 months salary” liability under the current law.
The widely circulated “3 months salary on termination UAE” rule largely reflects provisions under the old labour law regime, not the current framework.
Resignation & Early Termination Under a Limited Contract in UAE
Under current UAE labour law, an employee on a limited (fixed-term) contract may resign by serving contractual notice (30–90 days). The previous “three months’ salary compensation” rule largely applied under the old law. Today, compensation depends on contract terms and lawful termination grounds.
Can an Employee Resign Before the Contract Ends?
Yes, under Federal Decree-Law No. 33 of 2021, an employee may resign before the end of a fixed-term contract by:
• Serving the agreed notice period (30–90 days)
• Complying with contractual obligations
• Avoiding unlawful termination conduct
Unlike the old regime, resignation does not automatically trigger statutory compensation of three months’ salary.
Notice Period in UAE for Limited Contract
Under Article 43 of the current law:
• Either party may terminate the contract for legitimate reason
• Notice must be in writing
• Notice period must be between 30 and 90 days
• Both parties must continue performing obligations during notice
Failure to serve proper notice may lead to compensation equal to salary for the unserved period.
Resignation During Probation Period in UAE
Probation rules are separate.
Under Article 9:
If employee resigns during probation to join another UAE employer:
• 1 month written notice required
• New employer may compensate former employer for recruitment costs
If employee resigns to leave the UAE:
• 14 days written notice required
Probation resignation rules are strict and frequently misunderstood.
“3 Months’ Salary on Termination in the UAE”
This remains one of the most searched employment topics in the UAE, often misunderstood due to changes introduced under the new labour framework.
Under the Previous Law
(Federal Law No. 8 of 1980)
Under the former legislation:
- Article 119 required an employee who resigned early from a limited contract to compensate the employer. The compensation could reach up to half a month’s wage for each remaining year of the contract.
- If an employer terminated a limited contract early without lawful grounds, compensation could reach up to three months’ salary.
The old system relied on relatively fixed compensation formulas.
Under the Current Law
(Federal Decree-Law No. 33 of 2021, as amended in 2026)
The automatic “three-month salary” rule is no longer structured in the same way.
Instead:
- Compensation is assessed based on the employment contract terms.
- Liability depends on whether termination was unjustified.
- Greater emphasis is placed on proper notice compliance rather than preset compensation amounts.
The modern approach focuses more on contractual obligations and fairness rather than rigid penalty formulas.
When Can an Employer Lawfully Terminate Employment?
An employer may terminate employment in the following situations:
- Upon expiry of the fixed-term contract
- By serving the agreed notice period
- Without notice in cases of serious misconduct
- For legitimate and lawful business reasons
Termination must not be arbitrary, retaliatory, or discriminatory.
Termination Without Notice – Article 44 (Current Law)
Under Article 44 of the current law, an employer may dismiss an employee without notice if the employee:
- Uses a false identity or submits forged documents
- Causes significant material loss to the employer
- Violates workplace safety rules
- Is intoxicated during working hours
- Physically assaults the employer, supervisor, or colleagues
- Is absent without lawful excuse as defined by law
These grounds must be supported by documented and provable evidence.
Improper reliance on summary dismissal may expose the employer to claims for wrongful termination.
Non-Renewal of a Limited-Term Contract
When a fixed-term contract reaches its agreed end date:
- It automatically expires.
- No compensation is payable unless the contract provides otherwise.
- However, contractual notice requirements for non-renewal may still apply.
Failure to follow agreed notification procedures can result in disputes.
What Happens If a Company Terminates an Employee in the UAE?
If Termination Occurs with Proper Notice:
The employee is entitled to:
- Salary during the notice period
- End-of-service gratuity (if eligible)
- Payment for accrued but unused annual leave
- Settlement of any additional contractual entitlements
If Termination Is Unlawful:
Compensation for arbitrary dismissal may be awarded by the court based on the circumstances of the case.
The employee may file a complaint with MOHRE.
The dispute may escalate to the Labour Court if unresolved.
End of Service Benefits Under Limited Contract
Under UAE law, end of service gratuity is calculated as follows (for employees with at least 1 year service):
• 21 days’ basic salary per year for first 5 years
• 30 days’ basic salary per year after 5 years
• Maximum cap: 2 years’ total salary
Gratuity is based on basic salary only, not allowances.
Does Early Resignation Affect Gratuity?
Under the new law:
• Employees who resign after 1 year are entitled to gratuity
• The previous reduction formulas under old law have been removed
This is a major reform from earlier legislation.
How to Cancel a Labour Contract in UAE
Cancelling a limited contract requires both legal compliance and administrative processing.
Step 1 – Serve Written Notice
• Notice must comply with contractual terms (30–90 days).
• Notice must be documented.
Step 2 – Complete Notice Period
• Employee continues working unless waived.
• Employer must continue salary payments.
Step 3 – Settlement of Dues
Employer must settle:
• Pending salary
• Accrued leave
• End of service gratuity
• Contractual benefits
Step 4 – MOHRE Contract Cancellation
• Cancellation request filed through MOHRE system.
• Both parties confirm electronically.
• Visa cancellation processed afterward.
Improper cancellation can delay visa processing and expose the employer to wage claims.
How to Check My Labour Contract in UAE
Employees can verify their contract status through:
• MOHRE website
• MOHRE mobile application
• Typing centre authorised by MOHRE
This allows employees to confirm:
• Contract type (fixed-term)
• Salary registered with authorities
• Notice period
• Job title
Discrepancies between signed contract and MOHRE record may create enforceability issues.
Filing a Complaint with the Ministry of Human Resources & Emiratisation (MOHRE)
If a dispute arises:
Stage 1 – MOHRE Mediation
• Complaint filed online or via call centre
• Mediation meeting scheduled
• Settlement attempt made
Stage 2 – Referral to Labour Court
If no settlement:
• MOHRE issues referral letter
• Case filed before competent Labour Court
• Judicial proceedings commence
The labour court has authority to award:
• Compensation
• Unpaid wages
• Gratuity
• Arbitrary dismissal damages
What Is Arbitrary or Unlawful Termination?
Termination may be unlawful if:
• It is retaliatory
• It is discriminatory
• It lacks legitimate reason
• It violates statutory protections
Compensation for arbitrary dismissal may apply based on court assessment.
Employers must document legitimate reasons to mitigate exposure.
Common Legal Mistakes in Limited Contract Disputes
1. Believing “3 Months Salary” Applies Automatically
This largely reflected old law principles and is not universally applicable under current legislation.
2. Ignoring Written Notice Requirements
Verbal resignation or termination creates evidentiary problems.
3. Misunderstanding Probation Rules
Probation resignation has distinct statutory notice requirements.
4. Relying Solely on HR Advice
Employment disputes often involve legal interpretation beyond administrative guidance.
5. Failing to Update Contract Terms
Contracts must align with Federal Decree-Law No. 33 of 2021.
Employer Risk Exposure Under Limited Contracts
Employers face liability if they:
• Terminate without legal justification
• Fail to pay final dues within statutory time
• Misclassify contract terms
• Discriminate unlawfully
Employment disputes frequently escalate when:
• Notice period is disputed
• Gratuity calculation is incorrect
• Termination grounds are challenged
Proper drafting and compliance review reduces litigation risk.
Book a consultation with Al Ramsy Advocates & Legal Consultants today.
Special Note: Free Zones & Exceptions
Most private sector employees fall under MOHRE jurisdiction.
However:
• DIFC and ADGM have separate employment laws.
• Domestic workers are governed by Federal Decree-Law No. 9 of 2022.
Contract interpretation depends on jurisdiction.
Advanced Legal Considerations Under Limited Contracts in UAE
Under UAE employment law, limited (fixed-term) contracts require strict compliance with notice provisions, statutory protections, and termination procedures. Disputes typically arise from early termination, unpaid dues, or misinterpretation of old vs new law provisions. Both employees and employers must assess contractual wording alongside Federal Decree-Law No. 33 of 2021.
Practical UAE Example: Early Termination Dispute
Consider the following scenario:
An employee signs a 2-year fixed-term contract in Dubai in 2023.
After 8 months, the employer terminates employment citing “business restructuring” and provides 30 days’ notice.
The employee claims entitlement to:
• 3 months’ compensation
• Full gratuity
• Arbitrary dismissal damages
Under current law:
- There is no automatic 3-month compensation rule.
- Employer must show legitimate business reason.
- Notice period must comply with contract.
- End-of-service gratuity must be calculated based on actual service period.
If restructuring is genuine and notice is properly served, termination may be lawful.
If reason is pretextual, court may award compensation.
Compliance Checklist for Employees
Before resigning from a limited contract:
✔ Confirm notice period in contract
✔ Check probation status
✔ Verify gratuity eligibility (minimum 1 year service)
✔ Keep written resignation proof
✔ Confirm final settlement breakdown
Failure to document properly weakens legal claims.
Compliance Checklist for Employers
Before terminating a limited contract:
✔ Review termination grounds
✔ Confirm notice compliance
✔ Calculate gratuity accurately
✔ Settle dues within statutory timeframe
✔ Process MOHRE cancellation properly
Employment disputes often arise from procedural mistakes rather than legal entitlement itself.
Authority Positioning Block
Employment contract disputes in the UAE increasingly involve complex interpretation of transitional provisions between the old labour law and Federal Decree-Law No. 33 of 2021.
Where termination, compensation, or contractual enforceability is disputed, legal analysis must consider:
• Contract wording
• Statutory framework
• MOHRE procedures
• Labour court precedent
• Jurisdiction (mainland vs free zone)
For employers managing restructuring or employees facing wrongful dismissal, early legal assessment reduces exposure and strengthens negotiation position.
Al Ramsy Advocates & Legal Consultants provides employment law advisory, dispute resolution, and labour court representation across Dubai and the wider UAE.
Limited Contract – Frequently Asked Questions
What is limited contract in UAE?
A limited contract (now referred to as a fixed-term contract) is an employment agreement valid for a specified duration. It ends automatically at expiry unless renewed.
Is unlimited contract still valid in UAE?
No. Under Federal Decree-Law No. 33 of 2021, unlimited contracts were abolished in the private sector. All employment contracts must now be fixed-term.
Do I get 3 months salary on termination in UAE?
Not automatically. The old labour law contained structured compensation rules. Under the current law, compensation depends on contract terms and whether termination was lawful.
Can I resign after 6 months in limited contract UAE?
Yes. You may resign by serving contractual notice (30–90 days). Additional conditions apply during probation.
What is notice period in UAE labour law?
The notice period must be between 30 and 90 days, as agreed in the contract.
What is Article 119 of UAE Labour Law?
Article 119 under the old law governed early resignation compensation in limited contracts. It is no longer structured identically under the new legislation.
What is Article 121 UAE Labour Law?
Under the previous regime, Article 121 addressed termination without notice for serious misconduct. The new law includes similar provisions under updated article numbers.
Does resignation affect gratuity in UAE?
Under the current law, employees who complete at least one year of service are entitled to end-of-service gratuity, regardless of resignation, unless lawful dismissal grounds apply.
How to cancel labour contract in UAE?
Cancellation requires serving notice, settling dues, and processing termination through MOHRE or the relevant authority.
What happens if company terminates employee in UAE?
If termination is lawful and notice is served, employee receives dues and gratuity. If termination is arbitrary or discriminatory, compensation may be awarded.
Is probation resignation allowed in UAE?
Yes. Specific notice periods apply during probation depending on whether the employee remains in the UAE or joins another employer.
How to check my labour contract in UAE?
Employees may check their registered contract through MOHRE’s official platforms or authorised typing centres.
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