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.
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
- Confirm at least one year of adjusted continuous service.
- Divide the last monthly basic salary by 30.
- Apply 21 days per year for the first five years.
- Apply 30 days per year after the fifth year.
- 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
| Question | Older guidance often says | Current practical approach |
|---|---|---|
| Contract type | Limited or unlimited | Current private-sector contracts are fixed-term |
| Resignation reduction | One-third or two-thirds in some unlimited-contract cases | Do not apply those former fractions as the default current rule |
| Leaving before expiry | Possible loss of gratuity under older limited-contract explanations | Current Article 51 does not create a separate forfeiture formula based only on early departure |
| Core inputs | Contract type and reason for leaving | Basic 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
- UAE Government: private-sector employment lawsExplains that the new law abolished unlimited contracts and admitted fixed-term contracts.
- Federal Decree-Law No. 33 of 2021Current labour-relations framework and end-of-service provisions.