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Limited vs unlimited contract in the UAE: what changed and why it matters

The 2021 Labour Law ended unlimited contracts. Most people do not need to worry, but if you once had an unlimited contract, one rule can still change your gratuity.

The short answer

Under the UAE Labour Law in force since 2 February 2022 (Federal Decree-Law No. 33 of 2021), every employment contract is for a specified period, renewable by agreement (Article 8(3)). Unlimited (open-ended) contracts made under the old 1980 law had to be converted to fixed-term contracts (Article 68(2)).

Unlimited contract (old 1980 law)Fixed-term contract (law since 2022)
LengthNo end dateA set period, renewable
New contracts todayNot allowedThe only kind
Gratuity formula21 days a year for 5 years, then 30Same: 21 days, then 30
Resigning before 5 yearsGratuity was cut to 1/3 or 2/3No cut
RenewalNot applicableEach renewal adds to your continuous service (Article 8(4))

How an unlimited contract affects your gratuity

The formula itself is the same for both: 21 days of basic wage for each of the first 5 years, 30 days for each year after, at most 2 years of wage. The difference is resignation.

  • Service under a fixed-term contract: resigning never reduces the gratuity.
  • Service under an old unlimited contract: Article 68(3) allows the employer to calculate the benefit by the 1980 law. That law cut the gratuity when you resigned before 5 years.
Share of gratuity kept on resignation, old unlimited contract
Under 1 year0%1-3 years33%3-5 years67%Over 5 years100%

Renewing or extending a fixed-term contract does not restart your service: the new term is added to the old one (Article 8(4)). Your gratuity counts all of it.

How to check which contract you have

  1. 1Open the MOHRE app or website
  2. 2Find your work permit and contract
  3. 3Look for the contract type and the end date
  4. 4Keep a copy of every contract you signed

If your contract has an end date, it is fixed-term (limited). If you joined before February 2022 with an open-ended contract, ask your employer when it was converted. The date matters for the exception above.

Questions people ask

My fixed-term contract ended and was not renewed. Do I get gratuity? Yes, with at least one year of continuous service.

I keep working after my contract expired without signing a new one. The contract is treated as extended on the same terms (Article 8(5)), and your service continues.

Does "limited" mean I pay a penalty for leaving early? The current law has no such rule for gratuity. Leaving without the notice in your contract means you owe notice pay (Article 43). Work it out with the notice period calculator.

Work out your gratuity →

This is an estimate under the published law, not legal advice. MOHRE or a court gives the final answer in a dispute.

The conversion of unlimited contracts

The 2021 law told employers to convert every unlimited contract to a fixed-term contract within one year of the law coming into force, and the Minister could extend that period (Article 68(2)). After the conversion your service continues: it is one employment, not a new start.

QuestionAnswer
Does the conversion reset my service?No, your service continues
Does it change my gratuity formula?No, it stays 21 days, then 30
Can the old resignation cuts apply?Only to service under the old unlimited contract (Article 68(3))

Questions people ask about fixed-term contracts

How long can a fixed-term contract be? The law says the contract is for a specified period and can be renewed by agreement (Article 8(3)). Your contract states the period.

Does a renewal start my service again? No. Each renewal or extension is added to the first term, and your gratuity counts the whole service (Article 8(4)).

My contract expired but I kept working. What now? It is treated as extended on the same terms, and your service continues (Article 8(5)).

Can I leave before my fixed-term contract ends? Yes, with the notice your contract sets, at least 30 and at most 90 days (Article 43). If you leave without serving it, you owe notice pay.

Which contract do I have? Look at your contract copy or the MOHRE app. A contract with an end date is a fixed-term (limited) one.

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