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Limited vs unlimited contracts: what changed in 2022

If you search for UAE gratuity rules, older articles still split everything by "limited" and "unlimited" contracts. That split mattered under the old labour law - it no longer exists. Here is what actually changed.

Before February 2022: two contract types

  • Limited (fixed-term) contracts ran to a set end date. Leaving early could expose the worker to compensation claims, and ending one early could cost the employer compensation too.
  • Unlimited contracts had no end date. The big practical difference was gratuity: resigning from an unlimited contract meant a reduced payout (a third or two thirds of the full amount) until you passed 3 and then 5 years of service.

Since February 2022: one type only

Federal Decree-Law No. 33 of 2021, in force since 2 February 2022, abolished unlimited contracts. Every private-sector contract is now a fixed-term contract, renewable by agreement, with no statutory maximum total duration. Existing unlimited contracts had to be converted - MOHRE first set a one-year deadline, then extended it to the end of 2023 (MOHRE Resolution No. 27 of 2023). Any unlimited contract still on file is treated as fixed-term under the new law.

What this means for gratuity

  • The resignation reductions are gone. Whether you resign or are terminated, the formula is the same: 21 days of basic pay per year for the first 5 years, 30 days per year after, once you have completed one year of service.
  • Contract type is no longer an input to the calculation - only basic salary, service length and unpaid absence matter.
  • Notice periods are now standardised (30-90 days, set in the contract) instead of differing by contract type.

How to check your own contract

You can view a copy of your registered contract in the MOHRE app or on the MOHRE website (mohre.gov.ae) using your passport or Emirates ID details. Check two things while you are there:

  1. Your basic salary. Gratuity and overtime use basic pay only - make sure the registered figure matches what you agreed.
  2. Your start date. Your gratuity clock runs from your first day of work, not your visa stamp or probation end.

Then run the numbers on the gratuity calculator.

Sources

General information, not legal advice. For disputes contact MOHRE (80060) or a qualified lawyer.