📚 Home → Chapter 6: Contracts & MOUs

Chapter 6: Contracts & MOUs 📜

Create & Manage Legal Employment Agreements

⏱️ Reading Time: 20-25 minutes | Difficulty: Medium to Hard | Prerequisites: Chapters 1-5

📖 In This Chapter

📖 Understanding Contracts & MOUs

A Contract is a legal agreement between you and a worker that outlines the terms of employment. An MOU (Memorandum of Understanding) is a less formal agreement outlining mutual intentions.

Why Contracts Matter

  • ⚖️ Legal protection for both parties
  • 📋 Clarity on job terms, salary, duration
  • 🔒 Protection against disputes
  • 💼 Professional documentation
  • 📊 Compliance with UAE labor laws
  • 🏢 Essential for visa sponsorship
⚠️ Important Legal Note: Contracts should comply with UAE labor law. Consult with an HR legal specialist or labor lawyer before finalizing contracts. This system helps manage documents, but legal review is essential!

🔄 Contract vs MOU: What's the Difference?

Aspect Contract MOU
Formality Legally binding and formal Less formal, shows intention
Legal Force Can be enforced in court May not be enforceable legally
Use Case Employment relationships, final agreement Preliminary agreement, partnership exploration
Signature Both parties must sign Both parties sign (good practice)
Duration Specific period (1 year, 2 years, permanent) Usually no specific duration
When to Use Final hiring decision, worker accepts offer Initial agreement with agency or new partnership

Quick Decision Guide

  • 🟢 Use Contract when: Hiring a worker permanently or for specific duration
  • 🟡 Use MOU when: Starting partnership with supplier, exploring collaboration
  • ⚫ Use Both when: Partnership agreement (MOU) + Individual worker contracts

➕ Creating Contracts

Step-by-Step: Create a New Contract

  1. Go to Contracts Menu Click "Contracts" → "Contracts" from left menu.
  2. Click "New" Button
  3. Select Contract Type - Employment Contract (for workers)
    - MOU (for supplier partnerships)
    - Agency Agreement, etc.
  4. Enter Contract Details - Contract Name/Title
    - Worker/Partner Name
    - Job Position
    - Start Date
    - End Date (if fixed duration)
    - Salary/Rate
    - Currency
  5. Add Contract Terms Working hours, benefits, responsibilities, etc.
  6. Attach Contract Document Upload the signed PDF or Word document.
  7. Add Signatures Section (Optional) Track if both parties have signed.
  8. Set Status Draft, Pending Signature, Signed, Completed, Terminated, etc.
  9. Click Save
💡 Pro Tip: Use templates! Most contracts have standard format. Use a template to save time instead of creating from scratch every time.

📝 Contract Information Fields

Essential Contract Information

✓ Contract Title/Name

What it is: Clear name for the contract.

Example: "Mohammad Ali - Electrician Contract 2026", "ABC Agency Partnership MOU 2026"

Format: [Worker/Company Name] - [Position] - [Year]

✓ Employee/Partner Name

What it is: Full legal name of the person or company entering the contract.

Example: Mohammad Ali Ahmed, ABC Recruitment Services LLC

✓ Position/Title

What it is: The job title or role they're hired for.

Example: Electrician, Project Manager, Skilled Laborer, Agency Partner

✓ Start Date

What it is: When the contract begins/began.

Example: 15-02-2026

Tip: This can be in the past (for existing contracts) or future (for upcoming hires)

End Date

What it is: When the contract ends (if it's for a specific duration).

Example: 15-02-2027 (one year contract), 31-12-2026 (fixed end date)

Leave Blank if: Permanent position with no end date

✓ Salary/Rate

What it is: How much you'll pay per month.

Example: 3,500 AED per month

Include:

  • Base salary
  • Any bonuses or allowances (accommodation, transportation)
  • Payment frequency (monthly, bi-weekly)
  • Currency (AED, USD, etc.)
Contract Duration

What it is: How long the contract lasts.

Options:

  • Fixed Duration: 3 months, 6 months, 1 year, 2 years
  • Indefinite: No set end date (permanent)
  • Probationary: 3-6 months trial before permanent
Working Hours

What it is: Normal working schedule.

Example: "8 hours per day, 5 days per week, 8 AM to 5 PM Saturday to Wednesday"

Include:

  • Days of work (working days)
  • Hours per day
  • Shift pattern (if applicable)
  • Rest days
Leave & Benefits

What it includes:

  • Paid annual leave (usually 21-30 days in UAE)
  • Public holidays
  • Sick leave
  • Maternity/Paternity leave (if applicable)
  • Health insurance
  • Accommodation (if provided)
  • Transportation (if provided)
  • Meals (if provided)
Termination Clause

What it covers: How either party can end the contract.

Important points:

  • Notice period (how many days notice required)
  • Severance pay (if any)
  • Grounds for immediate termination (without notice)
  • End of service benefits

Example: "Either party can terminate with 30 days notice. In case of serious violation, immediate termination without notice is allowed."

Confidentiality & Non-Compete

What it covers: Restrictions on employee after leaving.

Typical provisions:

  • Can't share company secrets
  • Can't work for competitors (non-compete period)
  • Must return company property
  • Duration of non-compete (6 months, 1 year, etc.)

📋 Using Contract Templates

Why Use Templates?

  • ⚡ Save time - no need to create from scratch
  • ✅ Ensure consistency across all contracts
  • ⚖️ Include all required legal terms
  • 🛡️ Protect your company legally

Available Contract Templates

Template Use For Key Features
Standard Employment Blue collar & white collar workers Basic employment terms, 1-year duration
Fixed Duration Project-based or temporary workers Specific start and end dates
Senior Management Managers and executives Performance metrics, benefits packages
Agency Partnership Supplier/agency agreements Commission structure, candidate quality
Simple MOU Preliminary agreements Less formal, shows mutual intent

How to Use a Template

  1. Click "New" Contract
  2. Select "Use Template" If available, choose from existing templates.
  3. Choose Appropriate Template E.g., "Standard Employment Contract"
  4. Template Loads with Sample Content
  5. Customize for Your Contract - Replace [EMPLOYEE NAME] with actual name
    - Replace [SALARY] with actual amount
    - Adjust dates and terms as needed
  6. Add Any Custom Terms Special conditions specific to this person
  7. Review Carefully Make sure all information is correct
  8. Save
⚠️ Legal Disclaimer: Templates provide a starting point but should be reviewed by a legal professional. Every contract and situation is unique. Always have legal review before signing!

🔧 Managing Contracts

Tracking Contract Status

Each contract has a status throughout its lifecycle:

Status Meaning Action
Draft Still being prepared, not finalized Edit and update terms
Pending Ready for signatures, waiting for signatures Send to parties for signing
Signed Both parties have signed Archive for reference
Active Contract is in effect, person is working Monitor and manage
Expired Contract end date has passed Renew or terminate
Terminated Contract ended early by either party Archive and record reason

Updating Contract Information

  1. Open the Contract
  2. Click "Edit"
  3. Update Information Change salary, dates, terms, etc.
  4. Add Amendment Notes Document what changed and why
  5. Save
💡 Best Practice: Create a contract amendment document when making changes instead of just editing the original. This creates an audit trail and maintains legal documentation.

📄 Uploading & Storing Documents

What Documents to Store

  • 📄 Signed contract (PDF)
  • 📜 Contract amendments
  • ✍️ Signature pages
  • 📋 Any attachments (job description, policies, benefits schedule)
  • 🔐 Visa documents (if applicable)
  • 📋 Background checks or certificates

Uploading Contract Documents

  1. Open the Contract
  2. Find "Documents" or "Attachments" Section
  3. Click "Add Document" or "Upload"
  4. Select File Type - Signed Contract
    - Amendment
    - Supporting Document
  5. Choose File from Your Computer Usually PDF format is best for contracts
  6. Add Description (Optional) E.g., "Signed original, received from employee on 15-Jan-2026"
  7. Click Upload/Save
✅ Good Practice: Always upload the signed version. Keep a copy of the signed original in your physical files and in the system.

🔄 Contract Renewal & Expiry

Contract Renewal Process

  1. System Alerts Before Expiry You'll get notification 30 days before contract ends.
  2. Review Contract Check if worker wants to continue, performance record, any changes needed.
  3. Discuss with Worker Confirm they want to renew, discuss salary changes, new terms.
  4. Create New Contract Option 1: Create completely new contract
    Option 2: Use "Renew" function to copy with new dates
  5. Update Terms If Needed Adjust salary, benefits, duration, etc.
  6. Get Signatures Both parties must sign the new contract
  7. Mark Old Contract as "Completed" Archive the expired contract
  8. Update Status of New Contract to "Active"

What Happens When Contract Expires?

If Worker Continues Working Without New Contract

Issue: In UAE, if worker continues after contract expires, it's considered automatic renewal under original terms.

Recommendation: Always have a new contract signed before previous one expires to avoid misunderstandings.

If Worker Leaves at Contract End

Steps:

  • Mark contract status as "Completed"
  • Add end of service notes
  • Record final salary payment and benefits
  • Archive all documents
  • Update candidate status to "Inactive" if not re-hiring
If Contract is Terminated Early

Steps:

  • Document the reason for termination
  • Record termination date
  • Calculate final settlement (salary, gratuity, unused leave)
  • Change status to "Terminated"
  • Maintain all documentation for legal protection

Contract Renewal Checklist

  • ☐ Worker's performance review completed
  • ☐ Salary adjustment decided (if any)
  • ☐ New contract terms agreed with worker
  • ☐ Legal review completed
  • ☐ Contract printed and signed by both parties
  • ☐ Signed contract uploaded to system
  • ☐ Worker copy provided to employee
  • ☐ HR records updated
  • ☐ Payroll updated with any changes

❓ FAQ & Troubleshooting

Q: What's the standard contract duration in UAE?

Standard is usually 1-2 years. Probationary period of 3-6 months is common for first-time contracts. After that, most workers prefer 2-3 year contracts for stability.

Q: Do I need a lawyer to create contracts?

Recommended: Yes, at least for review. While templates provide a good starting point, having a labor lawyer review ensures legal compliance with UAE laws. Cost is minimal compared to legal disputes later!

Q: Can I change a contract after it's signed?

Yes, but both parties must sign an amendment or new contract. Don't change the original contract after signing - create an amendment document showing what changed, when, and why.

Q: Should I pay gratuity if contract ends?

In UAE, employees are entitled to end of service gratuity under labor law if they worked for 1+ year. Amount depends on length of service and resignation reasons. This should be specified in your contract.

Q: How long should I keep contract records?

Minimum: 5 years after contract ends (per UAE labor law). For employment disputes, keep even longer. Archive contracts in the system permanently.

Q: Can I use different contracts for different workers in the same role?

Yes, but be careful! If terms are significantly different without valid reason, it could be considered discriminatory. Try to keep similar terms for similar positions. Document any differences clearly.

🎯 Key Takeaways

You've now learned:
  • ✅ Difference between contracts and MOUs
  • ✅ Why contracts are legally important
  • ✅ How to create contracts with all necessary terms
  • ✅ How to use contract templates effectively
  • ✅ How to manage contract lifecycle
  • ✅ How to properly store contract documents
  • ✅ How to handle contract renewal and expiry

🚀 What's Next?

Now that workers have contracts, learn how to deploy them to their actual work locations and manage their assignments.

Next Chapter: Chapter 7: Deployments - Track Worker Placement & Assignments
📚 Table of Contents