Unlimited contracts were abolished in 2022, but their gratuity rules still trip people up – especially anyone with a long stint that began under the old system. The unlimited contract gratuity rules reduced your payout if you resigned before completing five years, on a sliding scale that surprised a lot of people at settlement time. This guide explains exactly how those legacy rules worked, with worked examples, and when they can still affect what you are owed. For a current figure, use the Unlimited Contract Gratuity Calculator.
What an unlimited contract was
An unlimited contract had no fixed end date – either side could end it with notice. It was the default for most private sector employees before February 2022. The catch was in how it treated resignation: leave of your own accord before five years and your gratuity was cut. Federal Decree-Law No. 33 of 2021 abolished these contracts, and all of them were converted to fixed-term contracts by 1 February 2023, so no new service accrues under these rules. But settlements covering older service still reference them.
The resignation reductions
The base entitlement was the same 21 days of basic pay per year. But if you resigned from an unlimited contract, a fraction was applied depending on how long you had served:
| Years of service at resignation | Fraction of gratuity paid | Example on AED 10,000 basic |
|---|---|---|
| Less than 1 year | Nothing | AED 0 |
| 1 to 3 years | One third | 2 years: AED 14,000 full, so AED 4,667 paid |
| 3 to 5 years | Two thirds | 4 years: AED 28,000 full, so AED 18,667 paid |
| 5 years or more | Full amount | No reduction applied |
Crucially, these reductions only applied when you resigned. If the employer ended the unlimited contract, you received the full 21 or 30-day calculation with no fraction applied. That asymmetry – full pay if let go, reduced pay if you quit – was the whole point of the old system, designed to discourage job-hopping.
A worked example
Say you were on an AED 10,000 basic salary and resigned from an unlimited contract after four years. Your daily wage is AED 333.33. The full four-year entitlement is 4 × 21 days = 84 days, or about AED 28,000. But because you resigned in the three-to-five-year band, only two thirds is payable – so you would receive roughly AED 18,667. Had your employer terminated you instead, you would have taken the full AED 28,000. Same salary, same service, very different outcome depending on who ended the contract.
Do these rules still apply to you?
For any service from February 2022 onward, no – the current law pays full gratuity whether you resign or are terminated. Where the old rules can still surface is a continuous, long-running job that started well before 2022, where part of the settlement is assessed under the previous framework. If you are comparing your situation, our guide on limited vs unlimited contract gratuity shows how the two old contract types differed, and how gratuity is calculated in the UAE covers the current formula. The Resignation Gratuity Calculator and the main gratuity calculator handle both eras.
What were the old unlimited contract gratuity rules in the UAE?
Do unlimited contract rules still apply?
How much gratuity did I lose by resigning on an unlimited contract?
Did termination pay more than resignation on an unlimited contract?
What replaced the unlimited contract rules?
How do I calculate gratuity for old unlimited-contract service?
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, Article 137.