UAE Gratuity Rules for Limited & Unlimited contracts

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Q: When to collect Gratuity, Before Cancellation or After Cancellation?
Q: What is newest Law for Gratuity in UAE?
Q: What is the difference between Termination and Resignation?
Q: How to Calculate Gratuity?
Q: What is the Gratuity for Limited Contract Holders?
Q: What is the Gratuity for Unlimited Contract Holders?
Q: I have just completed 2 Years, what is my Gratuity?
Q: I cancelled before completing Contract Period, will i get my Gratuity?
Q: I am working in current company for more than 5 Years, what is my gratuity?
Q: Am i eligible to get Gratuity in case of termination by Company?
Q: Please describe UAE Gratuity Law 2016.
Q: I am working under Free Zone Company, what is my Gratuity?
Q: What are the New Rules for Gratuity in private Companies?

We experienced that some employees have not given what they was estimated, and most of employees even do not know the calculation process.
This Article will show you step by step guidance to calculate your Gratuity in case of Resignation or Termination.

Before beginning to Article please note that the Gratuity calculation is based on Resignation and Termination and will only be calculate by BASIC SALARY.
Resignation means if employee quit a job before completing contract while Termination means where company terminate an Employee or Worker. 


Less than 1 Year:
As per UAE LABOUR Law Article 132, Section 2, if worker Resigns with less than a year of service, he will not get any gratuity.
Gratuity is only applicable when an employee completes one year of service with  a company.

More than 1 & Less than 3 Years:
If worker Resigns and he worked between 1-3 Years he should take  1/3rd of 21 days of basic salary for each year of employment.

More than 3 & Less than 5 Years:
If worker Resigns and he work more than 3 but less than 5 years, he should take 2/3rd 21 days for every year of worked.

More than 5 Years:
Resignation under Unlimited Contract after 5 years, worker should take 21 days basic salary for every year he/she worked and 30 days basic salary for additional years.  (if work with same company above 5 years) 

What if Company Terminates the Employee?
In case of Unlimited contract where the company terminates the worker, 21 days of wages from minimum 1 and maximum 5 years should be paid to Employee, If employee worked for more than 5 years, he/she will be eligible for 30 Days of Basic wage for each year of worked.


Gratuity for Limited Contracts are slightly different from Unlimited Contracts.
1/3rd and 2/3rd system does not apply under limited contract.

Without Completing Contract:
It is clearly mentioned in UAE LABOUR Law Article 138 that If employee have not completed his/her Limited Contract period as signed in Agreement, he/she will not be eligible for any Gratuity.
In simple words, if someone signed a contract for 2 years but resigned after 14 months, company will do not pay any gratuity to that worker.

1-5 Years:
If you have accomplished your limited contract and it is within 1 to 5 years, you are entitled for 21 day’s basic salary wage for every single year of work.

More than 5 Years:
If you have completed 5 years of continuous service with your company and have resigned contract, then for the first 5 years of work you are eligible for 21 day’s basic wage & for the service above 5 years, you will get paid 30 day’s basic wage for every year of service.

What if Company Terminates the Employee under Limited Contract?
In case you have been terminated by your Employer or Company and you have not completed your 1 year yet, you will not eligible for any gratuity, but if worked with the company for more than 1 year and less than 3 years, you will get 30 day’s of basic salary for No. of years your served before termination.

Follow below formula and calculate your Gratuity Online Now. 

A Simple Four-Banger

Formula 1:
Basic Salary ÷ 30 (days in Month) x 21 (basic salary days) x 2 (years of service) 
Example:  3000 ÷ 30 x  21 x  2 = 4200

How it Works?
3000 ÷ 30 = 100 Your daily Wage is 100 AED
100 x 21 = 2100 So, your 21 days of basic wage is 2100.
Now Multiply your basic wage with the No. of years you work :2100 x 2 = 4200

Formula  2:
Basic Salary x 21 days x No. of years of service / 30
Example: 3000 x  21 x 2 /30 = 4200 AED  


Q: What is the maximum Gratuity that we can get?
As per UAE LABOUR LAW, Article 132, maximum gratuity amount for employee cannot exceed 2 years gross salary.

Q: Do I get 3 month salary in case of termination?
Yes, if you are terminated for reason other than mentioned in UAE LABOUR LAW Article 120, you are eligible for 3 month’s compensation.

Q: When to collect Gratuity, Before Cancellation or After Cancellation?
The Gratuity should be paid before the cancellation of your your Labour Card or Visa, as company can take a sign from you on cancellation letter that may mention "I have Received all dues from this Company". Once you have signed that document you cannot claim your Gratuity again.

For more FAQ’s please Leave Your Comments Below, experts will answer your Queries.

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  1. I am working in a company at Dubai,in limited contract basis. I completed 2 years and renewed my visa,now I am resigning from my job? Should I have to pay any penalty for this or they will diduct anything from settlement? Please give a reply

  2. If someone working with a Company under limited contract of two years and don't want to resign his job after completing two years,will he be given Gratuity by the company....?

    1. If the employee wishes to renew, then no need to ask for end of service gratuity at the time of renewal.

  3. I've been working with my employer for 2years,i just finish my 1st term contract and i just renewed to them,the thing is i want to cancel my contract with them,but when i ask my employer he does not allow me,he told me i have to pay them 7,000aed for the expenses they made,now,my question is am i liable to pay them?
    Please with all due respect help me.

  4. hi good afternoon i just want to working in anairline company and my employer is based in our country as contract..can i avail this labor code if i will resign??thanks for the answers.

  5. informative post! I really like and appreciate your work, thank you for sharing such a useful facts and information about Employement law strategies, keep updating the blog, hear i prefer some more information about jobs for your career hr jobs in hyderabad .


    Business Services In Dubai |UAE Business Consultancy |PlusUAE

    PlusUAE is a business consultancy, helps in setting up new business ventures for local and international business investors in Abu Dhabi, United Arab Emirates.

  7. good day sir/mam my contract is limited 2 years and I'm finish 1 year already and im planing to gi home is there any problem like I have to pay for my visa cause I didn't complete my 2 years but only one year

  8. PlusUAE is a business consultancy, helps in setting up new business ventures for local and international business investors in Abu Dhabi, United Arab Emirates.

  9. I am limited contact employee my contact renewal after every 2 year if I resign after 3year and 9 month than I will be able to get gratuity ? Or not

  10. Quite a nice article and really impressed to read it. Currently was searching for gratuity rules as one of my friends dad is nearing retirement and will be paid a gratuity amount. He sought my help and trying to do it to best of my abilities.

  11. im am working for a company as a dj in a hotel bar, our working permit is stated as a clerk, for almost 3 years, coming to 4 years this coming january, wanting to know if we as an artist who works under 8hours, are also eligible for this article of gratuity ? if ever we want to finish contract? pls. help tnx...