If you are searching for the difference between a “limited” and an “unlimited” UAE employment contract, here is the answer that matters in 2026: the unlimited contract no longer exists. Federal Decree-Law No. 33 of 2021, in force since 2 February 2022, abolished the open-ended contract entirely. Every private-sector contract on the UAE mainland is now a fixed-term (limited) contract. If you read advice that turns on whether your contract is “limited” or “unlimited,” it is describing the old 1980 law, which no longer applies.
What changed on 2 February 2022
The old UAE labour law (Federal Law No. 8 of 1980) recognised two contract types: limited (a fixed end date) and unlimited (open-ended, terminable on notice). That distinction drove different rules for notice, early termination, and — most consequentially — how much gratuity you kept if you resigned.
Federal Decree-Law 33/2021 swept all of that away. It abolished the unlimited contract and admitted only fixed-term contracts. The government’s official portal states it plainly: the law “abolished the ‘unlimited’ type of contracts and admitted only limited or fixed-term contracts.”
Employers were given a transition window to convert existing open-ended contracts into fixed-term ones. The original one-year deadline (2 February 2023) was extended by MOHRE to 31 December 2023. That deadline has long passed — if you are employed on the mainland today, you are on a fixed-term contract regardless of what an older contract document said.
Is there a maximum contract length?
No. When the 2021 law first took effect, Article 8 capped fixed-term contracts at three years. That cap was removed by Federal Decree-Law No. 14 of 2022 in September 2022. Today your contract runs for whatever defined term you and your employer agree, and it can be renewed as many times as you both wish.
Signing a fresh contract with the same employer therefore costs you nothing, but moving to a new employer resets the five-year clock. Ten unbroken years on an AED 15,000 basic earns AED 127,500; the same ten years split as two five-year stints at two employers earns AED 105,000, because neither stint ever reaches the 30-day rate.
Notice periods
Either party can end a fixed-term contract by giving written notice. The statutory notice period is between 30 and 90 days, as set in your contract. During the notice period you remain entitled to 100% of your wage and benefits — on an AED 15,000 basic, a 90-day notice period is AED 45,000 of pay you are owed whether or not you are asked to work it. Terminating a contract for one of the limited lawful reasons (such as an Article 44 ground for summary dismissal) follows separate rules.
Probation
Probation can last up to six months. During probation, shorter notice rules apply and either party may end the relationship on different terms — but there are still procedural steps and consequences (including, in some cases, the employer’s recruitment costs if you leave to join another UAE employer). Check your contract and current MOHRE circulars before assuming you can leave without notice.
Probation is also the one period in which no gratuity accrues at all: the entitlement starts only once you complete one year of continuous service, so leaving in month five earns AED 0 in end-of-service benefit regardless of salary.
Non-compete and confidentiality
Post-employment non-compete clauses are enforceable only if reasonable in scope, duration, and geography — and a non-compete generally may not exceed two years. Overly broad clauses can be struck down or narrowed by the courts. If your contract contains one and you are planning a move, take advice before you sign or resign.
How this affects your gratuity
Because the contract type no longer varies, your gratuity no longer depends on it. Under the current law, once you complete one year of continuous service you accrue gratuity at 21 days’ basic pay per year for the first five years and 30 days per year after that — and you keep that accrual whether you resign or are terminated. The old rule that reduced gratuity for resigning before five years came from the 1980 law and was abolished.
The size of that change is easy to miss. Under the 1980 law, resigning between one and three years paid one third of the accrual and between three and five years two thirds; today it pays 100%. On an AED 15,000 basic, a three-year resignation that used to yield about AED 10,500 now yields the full AED 31,500. Whatever your total, Article 51(6) caps it at two years’ wage — AED 360,000 on that salary.
Use our Gratuity Calculator and Employment Benefits Calculator to model your entitlement.
When to seek legal review
Get advice if your contract contains unusual clauses, you are negotiating a senior role, or you are planning to resign or dispute a termination. The DIFC and ADGM financial free zones have their own separate employment laws, so if you work there these mainland rules do not apply to you. Labour disputes on the mainland go through MOHRE first, then the labour courts.
Quick Reference
| Item | Details |
|---|---|
| Governing law | Federal Decree-Law No. 33 of 2021 (in force 2 Feb 2022), as amended |
| Contract types today | Fixed-term only — the unlimited contract was abolished |
| Conversion deadline | 31 December 2023 (now passed) |
| Maximum term | None (3-year cap removed by Federal Decree-Law 14/2022, Sept 2022) |
| Notice period | 30–90 days at 100% of wage — AED 45,000 for 90 days on an AED 15,000 basic |
| Probation | Up to six months; AED 0 gratuity accrues before one year of service |
| Gratuity accrual | 21 days/year for the first five years, 30 days/year after — AED 10,500 then AED 15,000 a year on an AED 15,000 basic |
| Gratuity on resignation | 100% of the accrual (the old one-third / two-thirds scale was abolished) |
| Non-compete | Enforceable only where reasonable, and generally no more than two years |
| Applies to | UAE mainland private sector (not DIFC / ADGM / government / domestic workers) |
| Last verified | July 2026 |
Frequently Asked Questions
Are unlimited contracts still legal in the UAE?
No. Federal Decree-Law 33/2021 abolished the unlimited (open-ended) contract when it came into force on 2 February 2022, and employers had until 31 December 2023 to convert every remaining one. If you work in the UAE mainland private sector today, you are on a fixed-term contract whatever an older document says.
What is the maximum length of a UAE employment contract?
There is no maximum. The three-year cap that applied when the 2021 law first took effect was removed by Federal Decree-Law No. 14 of 2022 in September 2022, so your contract can run for any agreed term and be renewed as often as both sides want.
Does contract renewal reset my years of service for gratuity?
No. Each renewal continues your service rather than restarting it, so your years accumulate across renewals. That matters because the gratuity accrual rate rises from 21 to 30 days per year once you pass five years of continuous service — a 43% step up, or on an AED 15,000 basic the difference between AED 10,500 and AED 15,000 for every further year. Changing employer, unlike renewing, does reset the clock: ten unbroken years earns AED 127,500, while two five-year stints earn AED 105,000.
How long can probation last in the UAE?
Up to six months. Notice rules during probation differ from the standard 30–90 days, and leaving during probation to join another UAE employer can make you — or your new employer — liable for the original employer's recruitment costs. Check your contract and the current MOHRE circulars before you resign.
Is a non-compete clause enforceable in the UAE?
Only where it is reasonable in scope, duration and geography, and generally for no more than two years. Courts can narrow or strike down clauses that go further. If you have signed one and are planning a move, take advice before you resign rather than after.
Does my contract type still affect my gratuity?
No — that link was broken in 2022 along with the contract types themselves. Gratuity now accrues at 21 days of basic pay per year for the first five years and 30 days per year after that, identically whether you resign or are terminated, once you have completed one year of continuous service.
| Expert reviewer | Varun Punjabi |