Updated for 2026 UAE Labor Law
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How to Calculate Gratuity in UAE for a Limited Contract

Understanding your end of service benefits for fixed-term employment contracts in UAE.

Last Updated: February 2026• Reading Time: 7 mins

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Introduction

A limited contract (also known as a fixed-term contract) has a specific start and end date. This type of contract provides certainty for both employers and employees about the duration of employment.

When your limited contract reaches its natural end date, you are entitled to full gratuity without any deductions—unlike unlimited contracts where resignation may reduce your entitlement.

This guide explains everything you need to know about gratuity calculations for limited contracts under the new UAE Labor Law.

What is a Limited Contract?

Key Characteristics
  • Fixed duration (typically 1-3 years)
  • Specific start and end dates
  • Automatically ends on the specified date
  • Can be renewed by mutual agreement
  • Early termination may require compensation
Gratuity Benefits
  • Full gratuity at contract end
  • No reduction for natural contract completion
  • Same calculation formula as unlimited
  • Entitled after completing 1 year
  • Maximum 2 years' salary cap applies

Limited vs Unlimited Comparison

FeatureLimited ContractUnlimited Contract
DurationFixed (1-3 years)No fixed end date
TerminationEnds automaticallyRequires notice
Gratuity at EndFull (100%)Full (100%)
Gratuity on ResignationBased on serviceReduced based on service
Early TerminationCompensation may applyNotice period only

Frequently Asked Questions

A limited contract in UAE is a fixed-term employment agreement with a specific start and end date. The maximum duration is typically 2-3 years.

Yes, when your limited contract ends naturally (on the specified date), you are entitled to full gratuity based on your years of service.
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