The contract type that no longer exists
If a calculator asks whether your contract is limited or unlimited, it is modelling a law that was replaced in February 2022. The distinction mattered enormously — it decided how much of your gratuity survived a resignation. It does not exist any more.
The short answer
There is no such thing as an unlimited contract in the UAE private sector any more. Federal Decree-Law No. 33 of 2021 abolished it and admitted only limited — fixed-term — contracts, and it took effect on 2 February 2022. Existing unlimited contracts were transitioned to fixed-term ones.
Source: The UAE Government portal u.ae, on employment laws in the private sector: the law introduced new work models such as full-time, part-time, temporary and flexible; it abolished the “unlimited” type of contracts and admitted only limited or fixed-term contracts. It became effective on 2 February 2022, replacing the previous Federal Law No. 8 of 1980.
So if a calculator asks you to choose between limited and unlimited, it is modelling a law that was replaced. That is not a cosmetic problem. Under the old law the choice changed the money by a large margin.
What the distinction used to do
Under Federal Law No. 8 of 1980, resigning from an unlimited contract before completing five years cost you a large share of your gratuity — the entitlement was reduced on a sliding scale according to how long you had served and how the employment ended. A termination and a resignation produced very different figures from identical service.
| Question | Before 2 February 2022 | Now |
|---|---|---|
| Contract types available | Limited (fixed-term) and unlimited. | Fixed-term only. Unlimited contracts no longer exist in law. |
| Does resigning reduce the gratuity? | On an unlimited contract, yes — substantially, below five years’ service. | No. There is no reduction for resigning in the current law. |
| Does the contract type change the formula? | Yes — it selected which reduction rules applied. | No. One schedule applies to everyone inside the law. |
| What still changes the amount | Contract type, reason for leaving, length of service. | Length of service, your basic wage, unpaid leave, and your work model — not why you left. |
Why so much guidance still gets this wrong
Because the old rule was in force for forty-two years and the new one has been in force for four. A great deal of the internet’s UAE gratuity content was written before 2022, ranks well because it is old, and has never been revised. Some of it is on sites that otherwise look authoritative.
The practical test: if a page asks about your contract type, or offers a resignation reduction, it is describing the 1980 law. What actually happens when you resign is that the amount does not change — and this calculator asks anyway, then says so in words, because a reader who arrived expecting a penalty deserves to see it not applied rather than to wonder whether it was.
What replaced it
The law now distinguishes WORK MODELS rather than contract durations: full-time, part-time, temporary and flexible. That distinction does change the arithmetic — a part-time contract earns a share of the full-time entitlement set by hours, and temporary work under a year earns nothing — which is set out here.
So the modern equivalent of the question people are asking is not “limited or unlimited?” but “which work model is my contract?” — and unlike the old one, that is a question your contract can actually answer.
What happens when a fixed-term contract simply ends
Since every contract is now fixed-term, expiry without renewal has become an ordinary way for a job to end rather than an edge case, and it has its own consequences for notice and for what you are owed. That case has its own page.