Unlimited Contract Gratuity in UAE
"Unlimited contract" is historical terminology from the previous UAE Labour Law. This page explains what it meant, what the old rules were, and what applies today.
What Was an "Unlimited Contract"?
Under the previous UAE Labour Law — Federal Law No. 8 of 1980 — employment contracts were classified into two types:
- Limited (fixed-term) contracts: Had a specified end date. Both parties were bound for the contract duration.
- Unlimited (open-ended) contracts: Had no fixed end date. Either party could terminate with the required notice period.
This distinction was significant because it affected gratuity entitlement, especially when an employee chose to resign voluntarily.
Old Rules — Unlimited Contract Gratuity on Resignation
Under the old framework, if an employee resigned from an unlimited contract, the gratuity payable was reduced:
| Service Period at Resignation | Gratuity Entitlement (Resignation) |
|---|---|
| Less than 1 year | No gratuity |
| 1 year to less than 3 years | 1/3 of calculated gratuity |
| 3 years to less than 5 years | 2/3 of calculated gratuity |
| 5 years or more | Full calculated gratuity |
If the employer terminated the employee (other than for gross misconduct), full gratuity was generally payable regardless of service length.
What Changed Under the New Law?
Federal Decree-Law No. 33 of 2021, effective 2 February 2022, replaced the limited/unlimited contract framework with new work models (full-time, part-time, flexible, remote, temporary, shared-work).
Under the current law, the general rule is that an employee whoresigns and has completed at least one year of service is entitled to gratuity at the standard rates — without the 1/3 or 2/3 reduction that applied under the old unlimited contract resignation rules.
This was a significant improvement for employees who resign voluntarily.
Who Should Read This Page?
- Employees whose contracts pre-date February 2022 and who are assessing a complex transitional situation — consult a UAE employment lawyer.
- Anyone searching for "unlimited contract gratuity" who wants to understand why this term appears in older articles and search results.
- HR professionals and managers familiarising themselves with the historical context of UAE labour law reform.
Historical Calculation Example (Old Law — For Reference Only)
⚠ This historical calculation is shown for reference ONLY. Do not use it for current cases.
Legal Sources
- Historical: Federal Law No. 8 of 1980 on Regulation of Labour Relations (repealed)
- Current: Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations
- Official source: mohre.gov.ae
Independence: Independent calculator — not affiliated with MOHRE, the UAE Government, Dubai Development Authority, or any government entity.