Limited vs Unlimited Contract Gratuity in the UAE (2026 Guide)

Two different gratuity calculators can give you two different numbers for the exact same salary and dates — and the reason almost always comes down to one question: are you on a limited (fixed-term) contract or a legacy unlimited contract? This page explains exactly how to tell the difference and what it changes about your payout.

The Short Answer

Since February 2, 2022, when Federal Decree-Law No. 33 of 2021 came into force, every new UAE employment contract is required to be a limited (fixed-term) contract. If you were hired after that date, you are almost certainly on a limited contract, and none of the resignation penalties described below apply to you — you get full gratuity as long as you’ve completed one year of service and served your notice.

If your contract started before February 2, 2022 and has not since been renewed or converted into a new fixed-term agreement, you may still be on a legacy unlimited contract. These older contracts carry a different, less generous set of resignation rules, explained in full below.

How to Tell Which Contract You’re On

  • Check the start date on your signed employment contract, not your visa issue date or your first pay slip date.
  • Check whether your contract states an end date (limited) or has no end date (unlimited).
  • If your contract has been renewed or re-signed at any point since February 2022, it has almost certainly been converted into a limited contract.
  • If in doubt, ask HR directly which type of contract you currently hold — this is a factual question they are required to answer accurately.

Limited (Fixed-Term) Contract: Gratuity Rules

Limited contracts follow a single, consistent rule regardless of whether you resign or are terminated (as long as you weren’t dismissed for serious misconduct):

  • Under 1 year of service: No gratuity
  • 1–5 years: 21 days’ basic salary per year
  • Over 5 years: 21 days per year for the first five years, then 30 days per year after that

There is no reduction for resigning early on a limited contract, beyond the one-year minimum. This is the version of the law that applies to the large majority of the UAE workforce today.

Legacy Unlimited Contract: Resignation Rules

If you resign from a legacy unlimited contract, your entitlement is reduced based on how long you’ve served:

  • Under 1 year: No gratuity
  • 1–3 years: One-third (â…“) of the standard 21-day entitlement per year
  • 3–5 years: Two-thirds (â…”) of the standard 21-day entitlement per year
  • Over 5 years: Full 21 days per year for the first five years, then 30 days per year after that

Legacy Unlimited Contract: Termination Rules

If your employer terminates you from a legacy unlimited contract (without misconduct on your part), the reduction above does not apply. You receive the full 21/30-day rate as long as you’ve completed at least one year of service — the penalty is specifically tied to resignation, not termination.

Side-by-Side Comparison

  • Limited contract, resignation: Full 21/30-day rate, no reduction
  • Limited contract, termination: Full 21/30-day rate, no reduction
  • Legacy unlimited contract, resignation (1–3 yrs): â…“ of the 21-day rate
  • Legacy unlimited contract, resignation (3–5 yrs): â…” of the 21-day rate
  • Legacy unlimited contract, resignation (5+ yrs): Full rate
  • Legacy unlimited contract, termination (any tenure over 1 yr): Full rate

Why This Causes So Much Confusion Online

A lot of gratuity calculators and guides either apply the resignation penalty to everyone, or assume it’s been abolished for everyone — neither is correct. The rule genuinely depends on your individual contract’s start date and whether it has been renewed since the 2022 reform. If you’re unsure which category you fall into, the safest step is to confirm directly with your HR department or MOHRE before resigning, since the difference can be worth thousands of dirhams.

Once you know your contract type, use the UAE Gratuity Calculator to get your exact estimate, or read our breakdown of why different calculators give different results if the numbers you’re seeing elsewhere don’t match.

Frequently Asked Questions

Are unlimited contracts still legal in the UAE?

New unlimited contracts have not been issued since February 2, 2022. Existing unlimited contracts that haven’t been renewed or converted may still be in effect as legacy agreements, subject to the older resignation rules.

I was hired in 2023 — am I on a limited or unlimited contract?

You are almost certainly on a limited (fixed-term) contract, since all new contracts issued after February 2, 2022 are required to be limited under Federal Decree-Law No. 33 of 2021.

Does the resignation penalty apply if I’m terminated instead of resigning?

No. The reduced entitlement for early resignation on a legacy unlimited contract only applies to resignation, not termination.

My contract was renewed in 2023 but originally started in 2020 — which rules apply?

A renewal since February 2022 has very likely converted your agreement into a limited contract. Confirm the exact wording with HR, since this changes your resignation entitlement significantly.

Where can I double-check which rules apply to my specific case?

Your HR department can confirm your current contract type directly, and MOHRE can be contacted for an official clarification if there’s a dispute.