If you are trying to work out limited vs unlimited contract gratuity in the UAE, here is the short version: today they pay the same. Under the current federal labour law, your contract label no longer changes your end-of-service benefit, so learning how to calculate gratuity in the UAE for an unlimited contract is exactly the same as calculating it for a limited one. This page shows you the method, gives you side-by-side worked numbers, and lets you run your own figures in the calculator.
The rules below reflect Federal Decree-Law No. 33 of 2021, enforced by the Ministry of Human Resources and Emiratisation (MOHRE). For the full story of how the law changed in 2022, see our explainer on limited vs unlimited gratuity history. If you just want a number, start with the tool.
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How to calculate gratuity in the UAE for an unlimited contract
The method is the same whether your contract is described as limited or unlimited. Gratuity is built on your last basic salary only, ignoring housing, transport and other allowances. Here is the full formula:
The three-step method
First, find your daily wage: divide your monthly basic salary by 30. Second, apply 21 days of basic pay for each of your first five years of service. Third, apply 30 days of basic pay for each year beyond five years. You need a minimum of one full year of continuous service to qualify, and the total gratuity is capped at two years' pay. Under the unified law, resignation does not reduce this figure the way it once did.
Let's use a common example. On a monthly basic salary of AED 10,000, your daily wage is AED 10,000 ÷ 30 = AED 333.33. That single daily figure drives everything below, and it answers the popular question of how to calculate gratuity in the UAE for 2 years, 5 years, or 8 years of service.
Worked examples at AED 10,000 basic
| Service length | Calculation (21 days/yr) | Gratuity (same for limited or unlimited) |
|---|---|---|
| 2 years | 2 × 21 × AED 333.33 | AED 14,000 |
| 5 years | 5 × 21 × AED 333.33 | AED 35,000 |
| 8 years | (5 × 21 + 3 × 30) × AED 333.33 | AED 65,000 |
Notice that at eight years the first five years still use the 21-day rate, while years six through eight step up to the 30-day rate. This is why longer service is rewarded more generously. Every one of these figures is identical whether your paperwork says "limited" or "unlimited," which is the key point of any modern limited vs unlimited contract gratuity UAE comparison. To try your own salary and tenure, open the UAE gratuity calculator and enter your numbers.
Old limited vs old unlimited vs current: the comparison
Before 2022, the contract type mattered a great deal, especially for people who resigned. The table below is a historical comparison only, so you can see why the two contract types once produced very different payouts. It does not apply to service under the current law.
| Situation on resignation | OLD unlimited contract (pre-2022, historical) | OLD limited contract (pre-2022, historical) | CURRENT unified law |
|---|---|---|---|
| 1–3 years' service | Roughly one-third of gratuity | Could forfeit gratuity if resigning early before the term ended | Full gratuity, no reduction |
| 3–5 years' service | Roughly two-thirds of gratuity | Risk of forfeiture on early exit | Full gratuity, no reduction |
| 5+ years' service | Full gratuity | Full gratuity if term completed | Full gratuity, no reduction |
Under the old system, an unlimited-contract employee who resigned early had their gratuity scaled down, and a limited-contract employee who broke the fixed term early could lose the benefit altogether. The unified law removed both penalties. The 21-and-30-day accrual now runs the same way regardless of contract label or whether you resigned or were terminated. For the detailed background and dates, read the 2021 law explainer.
Which rule applies to you now
All private-sector employees under MOHRE are now on fixed-term contracts, and the current calculation applies to your service. The old unlimited-contract reduction scale is no longer part of the law, so you should not use those fractions to estimate your payout for current service. If someone quotes you a reduced resignation gratuity based on the one-third or two-thirds rule, that guidance is out of date.
In practice this means the answer to "how to calculate gratuity in the UAE for an unlimited contract" is simply the standard method: daily wage of basic ÷ 30, then 21 days per year for the first five years and 30 days per year after that, subject to the one-year minimum and the two-year pay cap, on basic salary only. The same is true for limited contracts. The only variables that change your number are your basic salary and your length of service.
Rather than guess, run the exact figures. The calculator handles the 21-to-30-day switch, partial years, and the cap automatically, so you get an accurate estimate in seconds.
Open the UAE gratuity calculator →