Limited vs Unlimited Contracts: UAE Gratuity in 2026

Correction, 7 October 2026: This guide has been revised to remove unsupported salary-band calculations, automatic old/new-law splits and assumptions that DIFC and ADGM share the same benefits system.

The current federal framework uses fixed-term contracts. Old paperwork describing an unlimited contract does not create a separate new 2026 calculator formula.

Renewals do not automatically reset the clock

The official contract guide explains that extensions and renewals are included for end-of-service benefits. Confirm continuous employment with the same employer and distinguish it from a settled departure followed by a new employment.

Older documents still help

Keep older contracts to establish dates and continuity. If an employer proposes old resignation fractions or a February 2022 split, request its legal basis. A genuinely historical ended contract or disputed transition needs review; a label alone is not enough.

The standard federal calculation

For a foreign full-time employee under federal private-sector law, Article 51 uses the last basic wage: 21 days for each of the first five qualifying years, then 30 days for each additional year. After one year of continuous service, fractions of a year are counted proportionately. Unpaid absence is excluded from the gratuity service calculation. Housing and transport allowances are not part of the basic-wage calculation. The statutory ceiling is two years’ wage; keep the distinction between basic wage and total contractual wage clear.

Check which rules apply before using a calculator

DIFC’s DEWS or another qualifying scheme, ADGM employment regulations and the federal alternative Savings Scheme have distinct rules. Part-time work needs its contractual hours ratio; domestic, government and pension-covered employment are outside this standard calculation. Use the free-zone comparison to identify your arrangement.

Compare an itemised breakdown

Use the Final Settlement Checker for a standard federal monthly-paid case. Ask HR for the wage basis, qualifying service, unused leave, notice position, earned pay and each proposed deduction. A calculator estimate is a starting point for questions, not a decision on your legal entitlement.

Reviewed 7 October 2026. General information, not personalised legal advice. If the contract, service continuity, salary change or deduction is disputed, confirm the facts with the relevant authority or a qualified employment adviser.

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