UAE gratuity rules changed fundamentally on 2 February 2022. Before that date, resigning early could cost you two-thirds of your gratuity or more, and your entitlement depended on whether you held a limited or unlimited contract. Today, under Federal Decree-Law No. 33 of 2021, resignation and termination are treated the same, and the limited-versus-unlimited distinction barely matters anymore. This page explains exactly what changed and which rules apply to you.
Why This Confusion Still Exists About Old and New UAE Gratuity Law
If you search for UAE gratuity rules online today, you’ll still find guides, forum answers, and even old news articles describing the pre-2022 system as if it’s current. Some of that content was accurate when it was written and simply hasn’t been updated. Some of it confuses which article numbers apply now versus before.
The Old Law: Federal Law No. 8 of 1980
Before 2022, UAE employment ran on two contract types, and your contract type changed your gratuity outcome dramatically if you resigned.
Unlimited (open-ended) contracts. If you resigned from an unlimited contract, your gratuity was reduced on a sliding scale based on your length of service:
- 1 to 3 years of service: entitled to only one-third (1/3) of your calculated gratuity
- 3 to 5 years of service: entitled to two-thirds (2/3) of your calculated gratuity
- 5 years or more: entitled to full gratuity
If your employer terminated you instead, without cause, you generally received full gratuity regardless of tenure.
Limited (fixed-term) contracts. These were treated strictly. If you resigned before your limited contract’s term expired, you were not entitled to any gratuity at all, unless your continuous service exceeded five years. Completing your fixed term, or being terminated by your employer, avoided this penalty.
Old disqualification articles. Gross misconduct disqualification and other exceptions under the old law were governed by a different set of article numbers than today, commonly cited as Articles 120, 121, and 118, alongside the calculation articles 132, 133, 134, 138, and 139. If you see any of these article numbers cited as the current basis for a gratuity rule, that’s a strong sign the source is describing the repealed 1980 law, not the law in force today.
Why the old system worked this way. The reduced-gratuity-on-resignation rule was designed to discourage employees from leaving early and to reward long-term loyalty to one employer. In practice, it mostly created confusion and disputes. Many employees didn’t realize their resignation date, not just their years of service, determined how much of their gratuity they’d actually receive, and MOHRE fielded large numbers of complaints from workers who felt blindsided by a fraction of the payout they expected.
The New Law: Federal Decree-Law No. 33 of 2021
Federal Decree-Law No. 33 of 2021 took effect on 2 February 2022 and rewrote gratuity from the ground up. Two changes matter most.
Resignation and termination are treated identically. Under Article 51, once you’ve completed at least one year of continuous service, you’re entitled to full gratuity whether you resigned, were terminated, or your contract simply expired, as long as you gave proper notice and weren’t dismissed for gross misconduct under Article 44 (the current, correct citation, replacing the old Article 120). The one-third and two-thirds resignation penalties described above are gone entirely.
Unlimited contracts no longer exist. The new law required all employers to convert existing unlimited contracts into fixed-term contracts. The original deadline was 1 February 2023, one year after the law took effect, and MOHRE extended it once, via Ministerial Resolution No. 27 of 2023, to 31 December 2023, to give companies more time to update their records. As of 2026, every active private-sector contract in the UAE should be fixed-term, capped at three years and renewable. If your offer letter or HR still describes your contract as “unlimited,” it should have been converted, and it’s worth confirming this with HR or MOHRE directly.
What happened to contracts during the transition window. Between February 2022 and the end of 2023, a large number of UAE employees were technically still on paperwork describing an unlimited contract while the law itself no longer recognized that category. In practice, MOHRE treated the substance of the current law as controlling for anyone whose employment ended during this window, not the outdated label on old paperwork. If you left a job during this transition period and you’re unsure which rules applied to your settlement, it’s worth double-checking the calculation against Article 51 rather than assuming your old contract type governed the outcome.
Old Law vs New Law: Side by Side Comparison
| Old law (before 2 Feb 2022) | Current law (2022 onward) | |
|---|---|---|
| Contract types | Limited and unlimited | Fixed-term only |
| Resign after 1–3 years (unlimited contract) | 1/3 of gratuity | Full gratuity |
| Resign after 3–5 years (unlimited contract) | 2/3 of gratuity | Full gratuity |
| Resign before term ends (limited contract, under 5 years) | No gratuity | Full gratuity |
| Resign after 5+ years | Full gratuity | Full gratuity |
| Terminated without cause | Full gratuity | Full gratuity |
| Misconduct disqualification | Articles 120, 121, 118 | Article 44 |
| Governing law | Federal Law No. 8 of 1980 | Federal Decree-Law No. 33 of 2021 |
Worked Example: The Real AED Difference
Say someone earning AED 9,000 basic salary resigned from an unlimited contract after 4 years of service, landing in the old law’s 3-to-5-year bracket.
Full entitlement (before any reduction):
| Step | Calculation | Result |
|---|---|---|
| Daily wage | 9,000 ÷ 30 | AED 300 |
| 4 years | 300 × 21 days × 4 years | AED 25,200 |
Under the old law, resigning at 4 years on an unlimited contract only entitled them to two-thirds of that figure: 25,200 × 2/3 = AED 16,800. That’s an AED 8,400 difference, purely because of which version of the law applies.
Now compare the same 4 years on a limited contract under the old law. If this same person had resigned before their limited contract’s term expired, with 4 years of service, the old law entitled them to nothing at all, since their tenure hadn’t yet crossed the 5-year threshold that limited-contract resignations required. The full AED 25,200 they’d receive today would have been AED 0 under the old limited-contract resignation rule. This is the starkest illustration of why the 2022 reform mattered: it didn’t just adjust a formula, it eliminated a rule that could zero out years of accumulated entitlement over a resignation date.
Which Law Applies to Your Case?
UAE labour lawyers have confirmed that the deciding factor is when your employment ended, not when you file a gratuity claim or when a court hears your case. If your resignation or termination took place before 2 February 2022, the old law’s Articles apply to your gratuity calculation, even if you’re only filing the claim now. If your employment ended on or after that date, the current law applies, regardless of how long ago that was. This matters for anyone dealing with a long-delayed final settlement or an old, unresolved dispute from a job that ended years ago.
For example, if you resigned from an unlimited contract in October 2021, four months before the current law took effect, and you’re only now pursuing an unresolved gratuity claim from that job, the calculation still runs on the old law’s reduced rates for your service length at the time you left, not the full entitlement the current law would give a resigning employee today. Conversely, if your employment continued past 2 February 2022 and only ended afterward, the current law covers your entire period of service, even the years you worked before the law changed.
FAQs
This page provides general information about UAE gratuity rules and is not legal advice. Determining which law applies to a specific case, especially a long-delayed claim, can involve real nuance. Consult MOHRE or a licensed UAE labour lawyer for advice on your individual situation.
Gratuity is only one part of what you’re owed when you leave a job. See our final settlement guide for the full breakdown of everything included in a final settlement, or use the UAE gratuity calculator on the homepage to estimate your own entitlement under the current law.