UAE Labour Law Changes: What Changed for Gratuity (2026 Update)
The Big Reform: Federal Decree-Law No. 33 of 2021
On 2 February 2022, the UAE replaced its 1980 Labour Law with Federal Decree-Law No. 33 of 2021 — the most significant employment reform in decades. Gratuity rules changed substantially.
Change 1: Resignation Penalties Abolished
Before: Resigning employees received only 1/3 of gratuity (1-3 years service), 2/3 (3-5 years), full (5+ years).
After: Resigning employees receive full gratuity after 1 year of service — identical to termination.
Impact: A worker resigning after 2 years on AED 10,000 basic now gets AED 14,000 instead of ~AED 4,667.
Change 2: All Contracts Became Fixed-Term
Before: Employers could offer "unlimited" (open-ended) contracts.
After: All employment contracts must be fixed-term (limited), typically up to 3 years, renewable. Existing unlimited contracts were converted.
Gratuity impact: Old contract-type-based gratuity differences eliminated.
Change 3: The Core Formula Stayed
The 21/30-day calculation survived: 21 days per year (first 5 years), 30 days per year (beyond 5), 24-month cap. What changed is who gets the full formula — now everyone with 1+ year.
Change 4: Notice Period Standardised
Written notice required: 30-90 days (per contract). During probation: specific shorter notice rules. Employers must give notice too.
Change 5: Payment Deadline
Employers must settle all end-of-service dues within 14 days of the last working day. Delays can be reported to MOHRE.
Change 6: Part-Time and Flexible Work Recognised
The new law formally recognises part-time, temporary, and flexible work, with pro-rata gratuity for part-timers.
Change 7: Anti-Discrimination Protections
Stronger protections around equal pay and non-discrimination, relevant when disputing gratuity calculations.
What Did NOT Change:
- 1-year minimum service still required
- Basic salary basis (allowances excluded)
- 2-year cap (24 months basic salary)
- Gross misconduct exception (Article 44)
Timeline:
- 2 Feb 2022: Federal Decree-Law No. 33 of 2021 takes effect
- 1 Feb 2023: Deadline for converting unlimited contracts
- 2022-2026: MOHRE enforcement ongoing
Are There 2024/2025/2026 Changes?
No further overhaul since the 2021 law. The 21/30-day formula, 1-year minimum, and abolished resignation penalties remain current as of October 2026. Beware: Articles titled "2024 changes" describing 1/3 and 2/3 penalties are recycling pre-2022 content.
Real-World Impact Examples:
Example 1: Sara resigns after 2.5 years, AED 11,000 basic. Old law: ~AED 6,417. New law: AED 19,250. Difference: AED 12,833 more.
Example 2: Omar terminated after 6 years, AED 18,000 basic. Daily 600. First 5: 63,000 + Year 6: 18,000 = AED 81,000. Same under both laws for termination (termination was always full).
How to Verify Your Employer Is Compliant:
1. Ask for a written gratuity calculation breakdown
2. Check they use basic salary (not total package)
3. Verify no 1/3 or 2/3 reductions applied
4. Confirm daily wage = basic ÷ 30
5. Check the 24-month cap is not exceeded
6. If wrong, cite Federal Decree-Law No. 33 of 2021 in writing
7. Escalate to MOHRE (800-60) if refused
Common Myths About "New" Rules:
Myth: "2024 introduced new gratuity rates." Reality: No. Rates unchanged since 2021.
Myth: "The 1980 law still applies to old employees." Reality: No. Replaced for everyone on 2 Feb 2022.
Myth: "Free zone employees follow different 2024 rules." Reality: DIFC uses DEWS, ADGM uses ER 2024, others follow federal law — none changed the 21/30 formula.
FAQs:
- Did gratuity rates increase in 2024? No. 21/30-day rates unchanged since 2021.
- Is the old 1980 Labour Law still relevant? No. Replaced 2 Feb 2022.
- Will rules change again soon? No announced overhaul as of October 2026. Monitor MOHRE and u.ae.
Sources: Federal Decree-Law No. 33 of 2021; u.ae; MOHRE. Last reviewed: October 2026. Disclaimer: general information only, not legal advice.
