Reviewed July 11, 2026

Limited and Unlimited Contract Gratuity in the UAE

A current explanation for employees finding outdated limited-contract and unlimited-contract gratuity rules online.

People still search for limited and unlimited contract gratuity in the UAE because many older guides use the previous labour law. Under the current private-sector framework, unlimited contracts were abolished and employers were required to convert them to fixed-term contracts. The current gratuity calculation therefore does not use separate “limited” and “unlimited” formulas.

Current position: for a standard qualifying private-sector employee, the calculation is based mainly on basic salary, eligible service, unpaid absence and work pattern—not an old contract-type reduction table.

What happened to unlimited contracts in the UAE?

The present labour framework recognises fixed-term employment contracts. MOHRE extended the conversion deadline for old unlimited contracts to 31 December 2023. Renewals and extensions form part of continuous service when gratuity is calculated.

How gratuity is calculated for a current fixed-term contract

  1. Confirm at least one year of adjusted continuous service.
  2. Divide the last monthly basic salary by 30.
  3. Apply 21 days per year for the first five years.
  4. Apply 30 days per year after the fifth year.
  5. Calculate a partial year proportionally and check the two-year wage cap.

How to calculate gratuity for an old unlimited contract

If an employee’s service began under the former law, historical rules can matter when reviewing benefits accrued before the new framework or a settlement prepared during the transition. That is different from applying the old resignation fractions to all service in 2026. For a disputed long-service calculation, obtain the contract history and ask MOHRE or a qualified UAE employment professional to confirm the transitional treatment.

Limited contract versus unlimited contract: old and current position

QuestionOlder guidance often saysCurrent practical approach
Contract typeLimited or unlimitedCurrent private-sector contracts are fixed-term
Resignation reductionOne-third or two-thirds in some unlimited-contract casesDo not apply those former fractions as the default current rule
Leaving before expiryPossible loss of gratuity under older limited-contract explanationsCurrent Article 51 does not create a separate forfeiture formula based only on early departure
Core inputsContract type and reason for leavingBasic wage, qualifying service, unpaid absence, work pattern and legal cap

Does resignation change fixed-term gratuity?

Resignation does not automatically reduce a qualifying worker’s gratuity through the old fractions. The employee should still review the notice period, because failing to serve required notice can affect the final settlement separately. See gratuity after resignation in the UAE.

Does termination change fixed-term gratuity?

Termination does not create a different 21-day or 30-day rate. However, notice pay, possible unlawful-termination compensation, unpaid salary, leave balance and lawful deductions can change the complete settlement. See gratuity calculation after termination.

Example: employee with an old “unlimited” label

An employee started work in 2019, the employer later converted the contract to fixed-term, and employment ends in 2026. The service should not restart merely because the contract format changed. The employee should verify continuous service, the final basic salary, unpaid leave and any documented transitional calculation rather than selecting an old online “unlimited contract” formula without context.

Official references

Frequently asked questions

Is an unlimited contract still used in the UAE private sector?
The current framework abolished the unlimited contract type and uses fixed-term contracts.
How do I calculate gratuity for an unlimited contract in 2026?
For a current standard calculation, use the Article 51 formula based on basic salary and eligible service. Review transitional service separately when the employment history began under the former law.
Do fixed-term employees receive gratuity after resignation?
A qualifying employee generally uses the standard formula after at least one year. Notice obligations and other final-settlement items remain separate.
Does changing a contract from unlimited to fixed-term restart service?
A conversion or renewal should not normally erase continuous service. Verify the official start date and contract history.
Are the old one-third and two-thirds resignation rules current?
No. They belong to the former legal framework and should not be applied as the default current calculation.

Calculate your estimated UAE gratuity

Use basic salary, exact working dates and unpaid-leave days to see a transparent result.

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