When it comes to employment contracts in the UAE, two options reign supreme: Limited and Unlimited. But beyond the basic difference in duration, one crucial aspect sparks confusion – gratuity. This guide unravels the mystery, explaining how your contract type impacts your end-of-service reward.
The Gratuity Basics:
Think of gratuity as a thank-you bonus for your service, paid upon contract termination. But the amount depends on several factors, including your contract type.
Limited Contracts:
- Fixed duration: Specifies a pre-defined end date.
- Gratuity: You’re entitled to gratuity only if you complete one year.
- Calculation:
- First 5 years: 21 days of basic salary per year (pro-rated for partial years).
- After 5 years: 30 days of basic salary per year.
- Important: No gratuity if you resign before 5 years, except for specific exceptions.
Unlimited Contracts:
- Open-ended: No predetermined end date.
- Gratuity: You’re entitled to gratuity regardless of service duration (as long as it’s more than 1 month).
- Calculation:
- 1-3 years: Reduced by 2/3.
- 3-5 years: Reduced by 1/3.
- 5+ years: Full gratuity (21/30 days depending on years).
- Remember: Resignation before 5 years means you receive a reduced gratuity.
Key Differences in a Nutshell:
| Feature | Limited Contract | Unlimited Contract |
|---|---|---|
| Duration | Fixed | Open-ended |
| Gratuity Eligibility | Requires 1+ years | Requires 1+ month |
| Gratuity Calculation (First 5 Years) | Full (21 days/year) | N/A |
| Gratuity Calculation (After 5 Years) | Full (30 days/year) | N/A |
| Gratuity after Resignation | No gratuity before 5 years (except exceptions) | Reduced gratuity before 5 years |
Choosing the Right Contract:
The best option depends on your individual needs and career goals. Consider factors like:
- Job stability: If you prefer a defined timeframe, a limited contract might be suitable.
- Career mobility: If you anticipate moving on quickly, an unlimited contract offers more flexibility.
- Gratuity implications: Understand how your chosen contract affects your potential end-of-service reward.