For years, the first thing anyone in the UAE asked about their end of service pay was which contract they had. The limited vs unlimited contract gratuity question mattered enormously, because the two types treated resignation very differently. Here is the part most people have not caught up with: unlimited contracts no longer exist. This guide explains what changed, how the old rules differed, and why the distinction can still affect what you are owed today. To see your own number, use the UAE Gratuity Calculator.
Unlimited contracts no longer exist
Federal Decree-Law No. 33 of 2021 abolished unlimited contracts on 2 February 2022, and every existing unlimited contract had to be converted to a fixed-term (limited) contract by 1 February 2023. So if you are employed in the UAE private sector today, you are on a fixed-term contract – there is no such thing as an unlimited contract anymore. That single change swept away the biggest reason the two used to produce different payouts.
How gratuity works on today’s contracts
Every current contract uses the same formula, and it is a generous one compared with the old regime: 21 days of basic pay per year for the first five years, 30 days a year after that, and full gratuity whether you resign or are terminated – provided you have completed at least one year. The old penalty for resigning early is gone. In other words, the limited vs unlimited distinction has almost no practical effect on new service, because there is only one contract type and one set of rules. If you want the mechanics, our guide on how gratuity is calculated in the UAE lays out the full formula.
How the two used to differ
The distinction is worth understanding, because plenty of people are still settling service that ran under the old law. The difference showed up almost entirely when you resigned before five years. Under the old rules, a limited contract was actually harsher on resigners than an unlimited one:
| If you resigned (old law) | Old limited contract | Old unlimited contract |
|---|---|---|
| Less than 1 year | No gratuity | No gratuity |
| 1 to 3 years | No gratuity | One third of the entitlement |
| 3 to 5 years | No gratuity | Two thirds of the entitlement |
| 5 years or more | Full gratuity | Full gratuity |
The logic was that a limited contract committed you to a fixed term, so leaving early was treated as a breach. An unlimited contract was more forgiving – it still paid a reduced gratuity to resigners between one and five years. If either scenario applies to your older service, the Limited Contract Calculator and the Unlimited Contract Calculator apply the right era of rules.
Why it can still matter
Two situations keep the old distinction alive. First, if you have a long, continuous stint with one employer that began before February 2022, part of your service may be assessed under the old contract type. Second, disputes over payouts from that era still reference which contract you held. The reason you leave is a separate question – our guide on gratuity on resignation vs termination covers how exit type affects your settlement under the current law.
What is the difference between a limited and unlimited contract in the UAE?
Do unlimited contracts still exist in the UAE?
Is gratuity different for limited and unlimited contracts now?
Did I lose gratuity if I resigned on an old limited contract?
Which contract do I have now?
Does the contract type change my gratuity formula?
Last verified: 19 July 2026. This guide is for information only and is not legal or financial advice. Your settlement depends on your contract, service dates and any amounts owed. For disputes, contact MOHRE on 600 590000.
Sources: UAE Government – End of service benefits · Ministry of Human Resources and Emiratisation (MOHRE) · Federal Decree-Law No. 33 of 2021, and the former Federal Law No. 8 of 1980, Articles 132 and 138.