Whether you’re an employee planning your next career move or an employer ensuring compliance, understanding how gratuity works under limited and unlimited contracts in the UAE is essential. With updated UAE Labour Law regulations, gratuity is now easier to understand and even easier to calculate using a gratuity calculator in Dubai.
This blog explains the differences between contract types, how gratuity is calculated, and why using an online calculator is the fastest way to know your exact end-of-service benefit.
What Is Gratuity in the UAE?
Gratuity is an end-of-service financial benefit paid to employees who have completed at least one year of continuous service. It is calculated based on:
- Basic salary (not total salary)
- Years of service
- Contract type (limited or unlimited)
- Reason for leaving (resignation or termination)
Because multiple factors affect the final payout, employees and employers often rely on a gratuity calculator Dubai to get accurate results instantly.
Limited vs Unlimited Contract: What’s the Difference?
1. Limited Contract Gratuity
A limited contract has a fixed duration (e.g., 2 years or 3 years).
Gratuity entitlement depends heavily on whether the employee completes the contract term.
Eligibility Under a Limited Contract
You are entitled to gratuity if:
- You complete the full contract period.
- Your employer terminates you (for reasons other than misconduct).
- You resign but serve the notice period as per contract terms.
Gratuity Calculation (Limited Contract)
Gratuity is calculated as:
- 21 days of basic salary per year for the first 5 years
- 30 days of basic salary per year after completing 5 years
Example:
An employee with 3 years’ service receives 21 days × 3 years = 63 days of basic salary as gratuity.
Because resignations under limited contracts can sometimes reduce or forfeit gratuity, employees often use a gratuity calculator in Dubai to check their exact entitlement.
2. Unlimited Contract Gratuity
An unlimited contract is open-ended and offers more flexibility for both employee and employer.
Eligibility Under an Unlimited Contract
You receive gratuity if:
- You complete at least one year of continuous service.
- You resign (gratuity is still due after 1 year).
- You are terminated (not for gross misconduct).
Gratuity Calculation (Unlimited Contract)
The formula remains the same as limited contracts:
- 21 days of basic salary per year for the first 5 years
- 30 days of basic salary per year for each year after 5 years
Key difference:
Resignation rules are more flexible under an unlimited contract compared to limited contracts.
For quick and precise calculations, employees often use a gratuity calculator Dubai to understand the payout difference between resigning and being terminated.
Key Differences: Limited vs Unlimited Contract Gratuity
| Factor | Limited Contract | Unlimited Contract |
|---|---|---|
| Contract term | Fixed duration | No fixed duration |
| Resignation rules | Stricter; may affect gratuity | More flexible |
| Completion requirement | Must complete contract term | Gratuity after 1 year |
| Calculation formula | Same as unlimited | Same as limited |
| Notice period | As per contract | As per law or agreement |
Why You Should Use a Gratuity Calculator Dubai
A gratuity calculator Dubai helps you avoid manual errors and gives a real-time estimate of your end-of-service entitlement within seconds.
Benefits of Using a Gratuity Calculator
- Accurate results based on UAE Labour Law
- Calculates for both limited & unlimited contracts
- Supports scenarios like resignation, termination, or end-of-contract
- Saves time and avoids miscalculations
- Helps employees plan future finances
- Helps employers budget for staff settlements
If you want, I can create a custom HTML gratuity calculator widget for your website as well.
How to Calculate Gratuity Manually (Simple Formula)
Step-by-Step:
1. Multiply your daily basic salary
Basic salary ÷ 30
2. Multiply by entitlement:
- 21 days for each year (first 5 years)
- 30 days for each year (after 5 years)
3. Multiply by total years of service
4. Apply contract conditions (limited/unlimited + reason for leaving)
Even with the simple formula, calculations may vary depending on contract type, which is why using a gratuity calculator in Dubai is recommended.
Workforce Group UAE Gratuity Calculator
At Workforce Group, we understand how important it is for both employees and employers to accurately estimate end-of-service benefits. Our UAE Gratuity Calculator makes this process fast, simple, and fully compliant with the latest UAE Labour Law.
Why Use Workforce Group’s Gratuity Calculator?
- Instant Results: Get a clear estimate of your gratuity payout in seconds, no spreadsheets or manual math required.
- Straightforward Inputs: Just enter your basic salary, duration of service, and contract type (limited or unlimited), and you’re done.
- Accurate & Law-Compliant: Built to reflect current UAE Labour Law rules.
- Scenario-Based: Works whether you’re resigning after 2 years, completing a 3-year fixed-term contract, or being terminated.
- Smart Decision Tool: Helps you plan your financial future, whether you’re negotiating a severance package or prepping to change jobs.
- Employer-Friendly: Employers can also use it to estimate gratuity liabilities and stay ready for staff transitions.
Conclusion
Understanding gratuity under limited and unlimited contracts is essential for both employees and employers in the UAE. While the formula is straightforward, eligibility conditions can vary, making it important to use a gratuity calculator Dubai for precise results.
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