Limited vs Unlimited Contract UAE Gratuity

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:

FeatureLimited ContractUnlimited Contract
Gratuity EligibilityRequires 1+ yearsRequires 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 ResignationNo 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.

Gratuity Calculator

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