Non Renewal letter of Employment Contract in UAE Sample

The UAE Labour Law governs employment contracts in the United Arab Emirates.

The length of time and the possibility of renewal are two important clauses in an employment contract. 

In some circumstances, though, the employee and the employer may decide not to extend the contract after it expires.

A letter of employment contract that does not renew is then issued.

The purpose of this formal letter is to formally notify the worker that the employer has decided not to renew or extend their employment contract. 

To make sure that both parties follow the guidelines set forth by the UAE Labour Law, it is crucial to comprehend the nuances of this procedure.

The significance of a non-renewal letter, when it is required, how to write one, and an example letter to assist you in constructing one are all covered in this book. 

We will also examine the legal ramifications of non-renewal for both employers and employees.

A Non-Renewal Letter of Employment Contract

An official notice from an employer to an employee that the employer does not plan to extend the employee’s employment contract past its expiration date is known as a non-renewal letter of employment contract. 

Since this is an official notice, it should be sent out far in advance to prevent misunderstandings or legal issues.

A non-renewal letter must include essential information to guarantee that the employee is adequately informed, even though the UAE Labour Law does not mandate a particular structure. 

By ensuring that there are no misunderstandings or disagreements when the contract expires, this letter serves to safeguard the interests of both parties.

Legal Aspects to Take Into Account in the UAE When Sending a Non-Renewal Letter

Both the employer and the employee must be aware of the UAE Labour Law and the following important factors before writing a non-renewal letter:

• Notice Period Requirement: In accordance with UAE labour law, employers must typically give notice before ending or failing to renew an employee’s employment.

The notice period for workers on indefinite-term contracts is normally one month. Depending on the arrangement, this could change for contracts with set terms.

• Final Settlement: The employer is responsible for paying all unpaid balances at the end of the contract, including bonuses, gratuities, and unused leave. The date of these payments should be specified in the non-renewal letter.

• Gratuity Payment: Depending on how long they have worked, employees are eligible to receive a gratuity. The final wage and the conditions of the employee’s contract serve as the basis for calculating the gratuity.

The employee’s entitlement for a gratuity should also be explicitly mentioned in a non-renewal letter.

• Termination by Employer or Employee: If the employer chooses to end the contract before its expiration date without providing the appropriate legal justification, it may be deemed an unfair dismissal.

In a similar vein, early resignation may have an impact on an employee’s benefits at the end of their employment.

• Option for Renewal or Non-Renewal: Employees may occasionally be given the choice to extend their employment. It should be made clear if the employer has chosen not to extend the contract.

When Is a Letter of Non-Renewal Required?

An employer may choose not to extend an employee’s contract in a number of situations:

• Expiration of Fixed-Term Contracts: Depending on business requirements or other considerations, the employer may elect not to extend a fixed-term contract when it expires.

• Retirement: An employee’s contract might not be extended if they reach retirement age, which is normally 60 years old for foreign workers in the United Arab Emirates.

• Performance Issues: The employer may decide not to renew a contract if an employee is not living up to performance standards or if the employer’s business requirements have changed.

• Economic Reasons: Due to internal downsizing or financial issues, employers may choose not to extend an employee’s contract.

• Mutual Consent: In some situations, both parties may decide not to extend the agreement. This might be due to relocation, a change in career, or personal reasons.

Important Components of a Non-Renewal Letter

A letter of employment contract that is not being renewed should be professional, unambiguous, and brief. The essential components of the letter are listed below:

• Subject Line: The letter’s goal should be made clear in the subject line, which could be “Notice of Non-Renewal of Employment Contract” or “Non-Renewal of Employment Contract.”

• Date: Indicate the letter’s issuance date.

• Employee Information: Provide the full name, job title, and terms of the employee’s contract. This helps to guarantee that the job relationship is clear.

• Employment Acknowledgement: Start the letter by praising the worker for their service and contribution to the business.

• Declare unequivocally that the job contract will not be extended when it expires. Provide the precise date of the contract’s expiration.

• Reason for Non-Renewal (Optional): Although it is not required by law, employers are permitted to give a justification for not renewing, particularly if it has to do with performance or business circumstances.

• Benefits and Final Settlement: Clearly state the employee’s final settlement information, including pay, unused time off, and any additional benefits to which they may be entitled. Make sure the money will be paid in accordance with UAE labour law.

• Gratuity: If relevant, let the employee know if they qualify for a gratuity and describe the calculation process.

• End of Service: Bring up the employee’s last day of employment and whatever actions they must take to finish their end-of-service procedure.

• Request the employee to sign a copy of the letter or acknowledge receipt of it in writing as confirmation of receipt.

An Example of a Non-Renewal Letter for a UAE Employment Contract

A sample non-renewal letter of the employment contract is provided below for your reference:

ABC Corporation]
1234 Business Blvd.
Dubai, UAE, 12345
+971-4-123-4567
info@abccorp.com

Date: 19/01/2025

To: [John Doe]
[Marketing Manager]
[123 Main Street, Dubai, UAE]

Subject: Employment Contract Non-Renewal

Dear [Name of Employee],

We hope this message reaches you in good health.

We want to thank you for all of your efforts and commitment while you were employed with [Company Name]. Your assistance has been truly valued.

We regret to notify you that, in accordance with your employment contract dated [Contract Start Date], your contract with [Company Name] will not be extended when it expires on [Contract Expiry Date]. We have given it some thought and have chosen not to extend your contract because of [optional reason].

We would like to reassure you that, in compliance with UAE labour law, you are entitled to all benefits that are owed to you at the end of your contract. This comprises:

• Payment of your last salary.

• Reimbursement for any yearly leave that is not used.

• Payment of a gratuity according to the duration of your service.

We ask that you finish all required paperwork prior to [Last Working Day], which is your last day of employment.

If you need any help or clarification about your final settlement or any other questions, don’t hesitate to contact the HR department.

Once again, we appreciate your assistance and wish you luck in all of your future undertakings.

Regards,

[Ahmed Ali]

[CEO]

[ABC Corporation]

How an Employee Should Respond to Non-Renewal?

Receiving a non-renewal letter as an employee can be frightening, but it is imperative that you address the matter professionally. The following actions should be taken:

• Examine your contract: To learn about your rights regarding notice periods and non-renewals, review your employment contract.

• Request Clarification: If your employer’s explanation for the non-renewal is unclear, kindly request clarification.

• Plan Your Next Steps: Begin preparing for your next professional move if you are not awarded a renewal. Think about looking into job openings and revising your résumé.

• Recognize Your Rights: Make sure you get any benefits and last-minute payments that are owed to you, including final pay cheque, unused leave, and gratuity.

Conclusion

In the United Arab Emirates, a non-renewal letter of employment contract is a crucial component of the hiring process. 

To prevent any legal issues, both employers and employees should be aware of their rights and obligations under the UAE Labour Law.

While employees can safeguard their rights and be ready for the next stage of their careers, employers can guarantee a transparent and professional procedure by providing a clear and formal non-renewal letter.