Limited vs Unlimited Contract Gratuity in the UAE (Post-2022 Rules)
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The UAE abolished the limited and unlimited contract distinction on 2 February 2022.
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All private-sector contracts are now fixed-term.
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Gratuity is calculated the same way regardless of your former contract type.
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The old resignation penalty that cut gratuity under unlimited contracts no longer exists.
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Many older articles and calculators still repeat the outdated rules, so check the date of any source.
Quick answer: The UAE removed the difference between limited and unlimited contracts on 2 February 2022. All private-sector contracts are now fixed-term, gratuity uses one formula (21 days per year for the first five years, then 30 days per year), and there is no longer any reduction for resigning.
This is one of the most common questions in our complete guide to UAE end-of-service gratuity, because a lot of older content still repeats the pre-2022 rules.
The old system before February 2022
Under the former Federal Law No. 8 of 1980, an employee who resigned under an unlimited contract could lose part of their gratuity:
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Under 1 year: no gratuity.
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1 to 3 years: only one-third on resignation.
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3 to 5 years: two-thirds on resignation.
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5 or more years: full gratuity. These reductions caused widespread confusion and disputes.
What the 2022 law changed
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All contracts became fixed-term. From 2 February 2022, new private-sector contracts must be fixed-term, and existing unlimited contracts had to convert during a transition period.
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The resignation penalty was removed. Gratuity is now the same whether you resign or are terminated, once you complete one year. See resignation vs termination.
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One formula applies to everyone, so there is no separate "unlimited contract" math. The current method is set out in how to calculate gratuity in the UAE.
Why this still matters
If a calculator or blog asks you to choose "limited or unlimited," it is using pre-2022 rules. For any employment under the current law, the contract label no longer changes your gratuity. Confirm your figure with the current-law UAE gratuity calculator.
FAQ
Do unlimited contracts still exist in the UAE?
No new ones. Since February 2022 all private-sector contracts are fixed-term, and legacy unlimited contracts were required to convert.
Does my old contract type reduce my gratuity now?
No. The reduction for resignation was abolished, regardless of your former contract type.
How is my gratuity calculated today?
21 days of basic salary per year for years 1 to 5, and 30 days per year beyond five.
Sources and References
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Federal Decree-Law No. 33 of 2021 (UAE Labour Law), Article 51 on end-of-service gratuity and provisions on fixed-term contracts
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Federal Law No. 8 of 1980 (repealed), former limited and unlimited contract rules
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Ministry of Human Resources and Emiratisation, contracts and end-of-service guidance (mohre.gov.ae)
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UAE Government portal, employment contracts (u.ae)
This article is for general information and does not constitute legal advice. End-of-service entitlements and disputes should be reviewed with a qualified professional or the Ministry of Human Resources and Emiratisation (MoHRE).