Limited and unlimited contracts are essential in the UAE employment relationship, where parties are guided in entering just and clear agreements. If you’re an employer starting a company or an employee looking for a job, knowing these contracts is important. 

With an updated labour law of 2025, choosing the right contract keeps you compliant and supports your business or career goals. 

Now let’s go through limited and unlimited contracts, their features, differences, and why selecting the right one matters in the UAE.

What Is an Employment Contract in the UAE?

An employment contract in the UAE is a legally binding agreement between an employer and an employee, establishing a clear relationship between them. Limited and unlimited contracts ensure that both sides are informed of their rights and duties, and therefore, payroll methods become clear and fair.

Limited and unlimited contracts, guided by labour law, protect workers and businesses, creating trust and stability in the workplace. Understanding employee onboarding through these contracts helps new hires settle in smoothly, aligning with company goals from the start.

Every contract is tailored to a specific job and industry, although all include core information necessary to comply with legal standards. 

A human resource management service helps businesses draft these contracts, ensuring that they not only meet the country's laws but also take into account the specific roles provided.

Security is granted to employees through contracts that specify salary, working hours, and benefits. This clarity fosters a conducive work environment that enables both parties to focus on productivity and growth in the highly competitive UAE market.

Every contract must align with UAE labour law and typically includes the following:

• Employee and employer details

• Job title, role description, and workplace

• Start date and daily working hours

• Salary structure and benefits

• Probation period and annual leave entitlement

• Termination conditions and notice periods

• Non-compete clauses were applicable

Types of Employment Contracts in the UAE

Under UAE labour law, updated in 2025, there are two main types of employment agreements: limited and unlimited contracts. Most contracts are now fixed-term, limited to meet modern workforce needs, and are phasing out indefinite terms.

Limited Contracts

A limited contract (also called a fixed-term contract) runs for a set period, usually between one and three years, agreed upon by both parties. It is suitable for:

• Project-based work

• Seasonal roles

• Short-term assignments

Key Features:

• Duration: Fixed start and end dates (maximum of three years)

• Salary Stability: Pay remains constant unless amended by mutual agreement

• Renewal: Possible after expiry based on mutual consent

• Termination: Can be ended early with valid reasons; 30–90 days’ notice required

• Compensation: Up to three months’ salary if terminated without cause

• Benefits: Includes health insurance, annual leave, and end-of-service gratuity

Unlimited Contracts

An unlimited contract has no end date and continues until either party terminates it with notice. It was previously common in permanent roles but is now being converted to limited contracts under new regulations.

Key Features:

• Open Duration: No expiry date; continues until terminated

• Termination: Requires 30 to 90 days’ notice with full pay

• Job Security: Offers long-term employment stability

• Benefits: Similar to limited contracts (leave, sick pay, gratuity)

Though less common now, some contracts may still carry over under the old format until formally updated.

Key Differences Between Limited and Unlimited Contracts

Understanding the difference between these two contract types helps businesses manage workforce needs and ensures employees know their rights.

Why Choose the Right Contract in 2025?

Limited and unlimited contracts are key to the UAE’s employment system, balancing flexibility and stability for businesses and workers. By understanding employee onboarding through these contracts, companies can hire effectively, and employees can find roles that suit their career plans. 

In 2025, with labour law updates favoring fixed-term contracts, selecting the right contract ensures compliance, avoids penalties, and builds trust in the workplace.

Partnering with experts like BSH, a leader in contract solutions, streamlines HCM processes in the UAE. BSH helps businesses craft limited and unlimited contracts that meet labour law, optimising payroll methods and supporting growth in industries like technology or hospitality. 

For employees, clear contracts provide fair terms and protections, helping them succeed in the UAE’s job market.