UAE Extends Grace Period for Employees To Transition to Fixed-term Contracts to 31 December 2023

January 2023
Region: Middle East

The Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (the New Labour Law) came into effect on 2 February 2022 and set a deadline of 1 February 2023 for private sector businesses (registered outside of the DIFC and ADGM) to convert all unlimited-term employment contracts of their workforce to fixed-term contracts.

The New Labour Law included provision for the Ministry of Human Resources and Emiratisation (MoHRE) to exercise its discretion and extend this deadline for an additional period as may be required pursuant to “public interest”. The MoHRE has now issued Ministerial Resolution No. 27 of 2023, which provides for an extension until 31 December 2023 for companies to convert any unlimited-term employment contracts.

The extension of the New Labour Law’s deadline is welcomed insofar as employers have been afforded additional time to ensure their respective employees’ contracts are compliant with the New Labour Law.

In terms of action going forward, whilst the MoHRE’s announcement allows employers additional time to implement the conversion of any corresponding employees’ unlimited-term contracts to fixed-term contracts, companies should be mindful of the potential exposure to fines or penalties if these changes are not effected by 31 December 2023. We recommend employers that have not yet taken the requisite action work towards reviewing and revising existing contracts and engaging with affected employees in good time ahead of the extended deadline. It may also be prudent for employers to consider the logistics and timeframes with respect to converting certain existing employees’ fixed-term contracts to align with any forthcoming visa renewal due dates that are scheduled during the course of this year. We would be happy to advise further around this and assist you with working towards aligning the term of any new contracts with employees’ respective visa terms, which would be beneficial from an administrative perspective.

Please get in touch with our Middle East Labour & Employment Practice if you have any questions around how best to approach the conversion of affected employees’ contracts, both from an employee relations and a logistical perspective, ahead of the extended deadline. We are on hand to assist with preparing and finalising any required amendment letters or otherwise reviewing your internal contracts of employment to ensure that they are fully compliant with the New Labour Law.