Home / Limited vs Unlimited Contracts
Unlimited contracts no longer exist in the mainland UAE — and the gratuity penalties that came with the old system went with them.
Under the old UAE Labour Law (Federal Law 8 of 1980), employment contracts came in two forms, and which one you had made an enormous difference to what you received when you left:
Federal Decree-Law No. 33 of 2021 abolished the distinction. All mainland employment contracts are now fixed-term, and employers were required to migrate existing unlimited contracts onto the new form — a transition that ran to the end of the conversion window in early 2023.
The old resignation penalties are gone. Under the current law:
| Old law (pre-Feb 2022) | Current law | |
|---|---|---|
| Resign at 2 years | ⅓ of gratuity | Full gratuity |
| Resign at 4 years | ⅔ of gratuity | Full gratuity |
| Resign at 6 years | Full gratuity | Full gratuity |
| Terminated at any point over 1 year | Full gratuity | Full gratuity |
If you left before February 2022 the old reductions applied to you. If you are leaving now, they do not — regardless of what an older contract template or an out-of-date HR policy says. This is the most common area where employees are underpaid, because so much material online still describes the pre-2022 position.
"Fixed-term" sounds restrictive but the new regime is considerably more flexible than the old limited contract:
Failing to serve your notice period is still a breach, and your employer can claim compensation in lieu — but that is a separate claim against you, not a reduction of your gratuity. The two must not be conflated, and an employer deducting "resignation penalty" from gratuity is applying a rule that no longer exists. How notice pay works →
Some employees still hold paperwork referring to unlimited contracts, either because the migration was handled poorly or because nobody reissued the document. The label on the paper does not restore the old law. Your entitlements are determined by the legislation in force when your employment ends, not by the terminology in an old template.
If your employer calculates your settlement using the old one-third or two-thirds reduction, that is a straightforward underpayment and a clear basis for a MOHRE complaint. How to file a complaint →
No. Federal Decree-Law 33/2021 abolished the distinction and made all mainland employment contracts fixed-term. Employers were required to migrate existing unlimited contracts during the transition window that closed in early 2023.
No, not under the current law. The old reductions of one third and two thirds for resigning before five years were abolished in February 2022. Anyone with more than one year of service now receives full gratuity whether they resign or are terminated.
You serve the contractual notice period, typically 30 to 90 days. Terminating early with notice is lawful. If you fail to serve notice, your employer may claim compensation in lieu, but that is a separate claim and does not reduce your gratuity.
The law in force when your employment ends, which is Federal Decree-Law 33/2021. An outdated label on your paperwork does not revive the old reductions.
Automatic bans for resignation were removed with the 2021 law. Bans now attach to specific circumstances rather than being a routine consequence of leaving a job.
No. There is no such deduction under the current law. If your settlement shows a reduction because you resigned, it is being calculated under repealed rules and you can challenge it.