How will the Gratuity be Calculated when you move your Limited Contract to Unlimited Contract in UAE?

The gratuity computations are completely different for UAE limited contract and Unlimited contract.

According to Article 138 of the UAE Labour Law an employment contract may be for a definite or indefinite period. An definite term contract shall not exceed four years but may be renewed with a mutual agreement between both the parties for a specific period of time and when the contract is renewed the renewal shall be deemed as an extension of the original term and shall be added when considering workers total period of service.

In case of employee was on limited contract initial and thereafter contract renewed for unlimited period , the initial two years of service will be counted towards the new contract.

As per the Article 132 of UAE Labour Law, it is mentioned that:

The employee who has completed one year or more in the continuous service, is entitled to the end of service remuneration at the end of his service. Days of absence from work without pay are not included in computing the period of service, and the remuneration is to be calculated as follows:

  • Twenty one day’s pay for each year of the first five years of service
  • Thirty days pay for each additional year

In all cases, the total gratuity shall not exceed the wage of two years.

An employee is not entitled to end of service gratuity where he has been terminated summarily for gross misconduct pursuant to the provisions of the UAE Labour Law.

The court will always look into the last contract employee was on during the time of employment termination.

If the employee was on unlimited contract during the time of employment termination the court will look at the entire tenure of the employment relationship as unlimited contract.

The opinions will be based on the legal provisions and this remains to be tested before the Court of Law.

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