Unlimited Contract Gratuity in UAE: How Much Will You Get? If you’re on an unlimited contract in the UAE — or were until recently — you might be wondering: how much gratuity will I actually receive? The good news is that under the New UAE Labour Law (Federal Decree-Law No. 33 of 2021), unlimited contract employees now receive the same full gratuity as fixed-term employees, regardless of how they leave.
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What Is an Unlimited Contract?
An unlimited contract has no defined end date and continues until either party gives notice. Since February 2022, new unlimited contracts can no longer be issued in the UAE — all new hires must be on fixed-term contracts. However, employees hired before this date on unlimited contracts remain covered by their original terms until renewal.
📋 Official source: MOHRE – UAE Labour Law
Gratuity for Unlimited Contracts: The Formula
Under the 2022 Labour Law, the gratuity formula is the same for all contract types:
First 5 years: 21 days’ basic salary per year of service
Beyond 5 years: 30 days’ basic salary per additional year
Daily rate = Basic monthly salary ÷ 30
Cap: Total gratuity cannot exceed 2 years’ basic salary
📋 Official source: UAE Government Portal – End of Service Gratuity
Worked Example: 8 Years on an Unlimited Contract
Basic salary: AED 15,000/month | Service: 8 years
| Period | Calculation | Amount |
|---|---|---|
| First 5 years | (15,000 ÷ 30) × 21 × 5 | AED 52,500 |
| Years 6, 7 & 8 | (15,000 ÷ 30) × 30 × 3 | AED 45,000 |
| Total gratuity | AED 97,500 |
The 2-year cap check: 2 × (15,000 × 12) = AED 360,000 — well above AED 97,500, so no cap applies here.
Old Law vs New Law: What Changed for Unlimited Contracts?
Under the old Labour Law (pre-2022), employees on unlimited contracts who resigned received reduced gratuity:
| Years of Service | Old Law (Resignation) | New Law (Resignation) |
|---|---|---|
| Less than 1 year | No gratuity | No gratuity |
| 1–3 years | 1/3 of gratuity | Full gratuity |
| 3–5 years | 2/3 of gratuity | Full gratuity |
| 5+ years | Full gratuity | Full gratuity |
This is one of the most employee-friendly changes introduced by the 2022 law. If you resigned in your first 3 years under the old law, you received only a third of your entitlement. Now you receive everything.
Does Resignation Still Affect Gratuity on an Unlimited Contract?
No. Under the new law, resignation no longer reduces gratuity for any contract type. Whether you resign, are terminated, or your contract ends mutually, you receive the same full entitlement — provided you have completed at least 1 year of continuous service.
The only exception is dismissal for gross misconduct under Article 44, which may forfeit gratuity entirely.
Converting from Unlimited to Limited Contract
When your unlimited contract is renewed and converted to a fixed-term contract, your gratuity entitlement does not reset. Your total service period carries over continuously, and the gratuity clock keeps running from your original start date.
📋 Official source: MOHRE – New Labour Law Transition FAQ
When Must Gratuity Be Paid?
Your employer must settle all end-of-service payments within 14 days of your contract end date. If they delay or refuse, file a complaint with MOHRE via mohre.gov.ae or call 800-60.
FAQs
I’m still on an unlimited contract — do the new rules apply to me?
Yes. The gratuity calculation and resignation entitlements under the new law apply to all private sector employees, including those on pre-existing unlimited contracts.
What if my employer doesn’t convert my unlimited contract?
Your employment continues and remains valid. The new law’s protections still apply. MOHRE has confirmed that failure to convert does not invalidate existing contracts.
Is the gratuity cap different for unlimited contracts?
No. The 2-year basic salary cap applies equally to all contract types.
My contract says gratuity is calculated differently — which applies?
If your contract offers more than the statutory minimum, the contract applies. If it offers less, UAE law overrides it and you are entitled to the statutory amount.
Key Takeaways
- Unlimited contracts: no new ones since February 2022, but existing ones remain valid
- Gratuity formula is now identical for limited and unlimited contracts
- Resignation no longer reduces gratuity under the 2022 law
- Service continuity is preserved on conversion to fixed-term
- Gratuity must be paid within 14 days of contract end
Official Government Resources
| Authority | Link |
|---|---|
| MOHRE – Labour Laws | mohre.gov.ae |
| UAE Government Portal | u.ae – Gratuity Guide |
| MOHRE – New Labour Law FAQ | mohre.gov.ae/newlaw |
On an unlimited contract? Calculate your exact gratuity entitlement using our free UAE Gratuity Calculator — updated for the 2022 Labour Law.