What happened to unlimited contracts, and does it change your gratuity?

Unlimited contracts no longer exist for new hires. The 2021 Labour Law came into force on 2 February 2022 and every private sector contract under it is fixed term, renewable by agreement with no limit on its length.¹²

When did unlimited contracts have to change?

The law gave employers one year from 2 February 2022 to convert unlimited contracts into fixed-term ones, and let the Minister extend that.³ The Ministry of Human Resources and Emiratisation (MOHRE) moved the deadline to 31 December 2023 under Ministerial Resolution No. 27 of 2023.²

The new law also applies to unlimited contracts signed under the 1980 law.³

Check your current contract. If it still has no end date, ask your employer for the fixed-term version filed with MOHRE.

Does an old unlimited contract change your gratuity?

It can. Article 68(3) says the employer “may calculate the end-of-service gratuity in accordance with the provisions of the indefinite-term employment contract” in the 1980 law.³

Under the 1980 law the full gratuity for a worker on an unlimited contract was the same as today: 21 days’ wage for each of the first five years and 30 days’ for each extra year, capped at two years’ pay. The difference was resignation.⁴

The 1980 law also took away all gratuity when a worker was dismissed under its Article 120 or left without notice outside the cases it allowed.⁴

The 2021 law has neither rule.³ Which rules apply to years you worked on an unlimited contract is a question to put to MOHRE or a lawyer, with your contract dates.

How do you work out gratuity across both contracts?

The current formula counts all your continuous service with the same employer, on your last basic wage.³ If your employer applies the 1980 rules to your unlimited years, ask it to show the years and the rule it used for each part.

Keep both contracts, the unlimited one and the fixed-term one that replaced it. Then use the gratuity calculator for the figure under the current law, and compare it with your employer’s figure.

The small print

• Fixed-term contracts. The conversion rule is Article 68(1) and (2) of Federal Decree-Law No. 33 of 2021. The option to calculate gratuity under the old law is Article 68(3).³
• Extension. MOHRE’s release of 30 January 2023 names Ministerial Resolution No. 27 of 2023.²
• Old law. Gratuity on resignation from an unlimited contract is Article 137, from a limited contract Article 138, and loss of gratuity Article 139 of Federal Law No. 8 of 1980.⁴
• Language. The English texts are translations. The Arabic texts are the official ones.