Understanding how to calculate gratuity in UAE for limited contract is more than just learning a formula it about knows what you’re entitled to when your job ends. Whether your contract lasted one year or five, your end-of-service benefit represents appreciation for your dedication and service.
For many UAE workers, gratuity is not just a number it is a well-earned reward that can help you start your next chapter with financial peace.
Under the UAE Labour Law, every employee working on a fixed term agreement should know the process of gratuity calculation for limited contract in UAE. By learning the correct method for limited contract gratuity calculation UAE, you can easily estimate your payment, avoid confusion, and ensure that your employer settles your dues fairly and transparently.
What Is Gratuity (End-of-Service Benefit)?
Gratuity, also known as an end-of-service benefit, is a lump-sum payment given to employees when they leave a company after completing at least one year of continuous service. It is a legal right under UAE Labour Law and applies to both limited and unlimited contracts.
In simple terms, gratuity reflects your loyalty and service to the company. For limited contracts, the calculation depends on the duration of service and type of contract termination. The purpose of gratuity is to ensure financial stability when your employment ends.
Who Is Eligible Under a Limited Contract?
Under a limited contract, an employee signs a fixed-term agreement that clearly mentions the start and end date of employment. You are eligible for gratuity payment if:
• You have completed at least one year of continuous service.
• The contract has ended naturally, or you were terminated without valid reason.
According to Article 51 of the UAE Labour Law (Federal Decree-Law No. 33 of 2021), gratuity is a legal entitlement that must be settled upon the end of employment, provided the employee completes at least one year of continuous service.
However, if an employee resigns before completing the contract term, they may lose part or the entire gratuity, depending on the reason for resignation. The UAE Labour Law gratuity calculation for limited contract strictly follows these rules.
3 Simple Steps to Calculate Gratuity in UAE (For Limited Contracts)
Calculating gratuity may look complex, but you can easily do it using these three simple steps:
- Confirm your contract type and total years of service.
- Calculate your daily wage and annual entitlement.
- Prorate the amount for any partial year and apply deductions.
This process is the same method used by most companies and even by the gratuity calculator UAE limited contract tools available online.
Step 1 – Confirm Contract Type & Exact Service Period
The first step in limited contract gratuity calculation in UAE is to verify your contract type and calculate your total service duration.
For example, if your joining date is 1st January 2020 and your last working day is 1st January 2025, your total service is 5 years.
| Service Duration | Gratuity Type | Example |
| Less than 1 year | No gratuity | 8 months = Not eligible |
| 1–5 years | 21 days basic salary per year | 3 years = 63 days salary |
| More than 5 years | 30 days basic salary per year | 6 years = 150 days salary |
This helps you estimate your gratuity whether you are doing gratuity calculation after 5 years in UAE, gratuity calculation for 2 years in UAE, or even how to calculate 1 year gratuity in UAE.
Step 2 – Calculate the Daily Wage and Annual Entitlement
Next, find your daily wage by dividing your last drawn basic salary by 30.
Formula:
Daily Wage = Last Basic Salary ÷ 30
Once you have the daily wage, multiply it by 21 days for each year of service (if service is up to 5 years) or 30 days for each year (if service is above 5 years).
Example:
If your basic salary is AED 6,000 and you worked 3 years,
Daily wage = 6,000 ÷ 30 = 200 AED
Gratuity = 200 × 21 × 3 = 12,600 AED
This method applies to limited contract gratuity calculation UAE and aligns with the latest UAE Labour Law gratuity calculation for limited contract.
| Years of Service | Days of Salary per Year | Example Based on AED 6,000 Salary |
| 1–5 years | 21 days | 12,600 AED |
| Above 5 years | 30 days | 15,000 AED |
Step 3 – Prorate, Adjust, and Apply Deductions
If your service includes a partial year, this is an essential step in how to calculate gratuity in UAE for limited contract, by prorating it according to months worked.
| Duration | Gratuity Entitlement |
| 3 years 6 months | (3.5 years × 21 days) × daily wage |
| 5 years 4 months | (5 years × 30 days + 0.33 year × 30 days) × daily wage |
Also, in cases like gratuity calculation for termination in UAE or calculation of gratuity if terminated, deductions may apply if you were terminated for misconduct. Always confirm with the Ministry of Human Resources and Emiratisation (MOHRE) if there is a dispute.
Free Zone Cases — Limited Contracts in JAFZA, DIFC, ADGM
Free zones like JAFZA, DIFC, and ADGM have their own regulations for UAE limited contract gratuity calculation.
For instance, DIFC follows its Employment Law No. 2 of 2019, where gratuity is replaced by a DIFC Employee Workplace Savings Plan (DEWS).
In contrast, JAFZA and ADGM apply the UAE Federal Labour Law, so limited contract gratuity calculation in UAE is similar to mainland rules.
If you work in a free zone, confirm with your HR whether limited gratuity calculation applies or if your company uses a savings plan.
Worked Example: 3-Year Limited Contract (Step-by-Step)
Let’s understand this with a real example:
Case Study:
Mr. Ali worked for 3 years under a limited contract with a basic salary of AED 5,000. His contract ends normally (no termination or resignation).
| Details | Calculation | Result |
| Daily wage | 5,000 ÷ 30 | AED 166.67 |
| Gratuity per year | 21 × 166.67 | AED 3,500 |
| For 3 years | 3 × 3,500 | AED 10,500 |
So, his end of service gratuity UAE calculation limited contract equals AED 10,500.
Expert Tip: Always double-check your gratuity calculation using the official MOHRE gratuity calculator or consult a certified HR officer before signing your final settlement. Many employees lose part of their entitlement due to small calculation errors or wrong salary components.
Common Mistakes and Employee Tips
Many employees make small mistakes during termination gratuity calculation in UAE, which can cause losses. Some common ones include:
• Confusing limited and unlimited contracts.
• Ignoring partial year calculation.
• Not verifying basic salary (gratuity is not calculated on total salary).
• Misunderstanding termination and resignation rules.
Tip: Always use a verified gratuity calculator limited contract and cross-check with MOHRE. If unsure, request a written gratuity computation from HR to ensure accuracy.
Conclusion
The limited contract gratuity calculation UAE may seem complex, but once you know the rules, it’s easy to calculate your benefits accurately. Always check your contract type, service duration, and basic salary before applying the formula.
Whether you are doing gratuity calculation after 5 years in UAE or gratuity calculation for termination in UAE, following these 3 simple steps ensures that you receive the exact amount you deserve under the UAE Labour Law gratuity calculation for limited contract.
Understanding how to calculate gratuity in UAE for limited contract empowers every employee to claim their rights with confidence — every dirham earned, fairly received.
FAQs
Q1: How to calculate gratuity in UAE for limited contract?
ANS: You can calculate gratuity in UAE for a limited contract by multiplying your 21 days’ basic salary for each year of service for the first five years, and 30 days for every year after that.
Q2: What is the rule for limited contracts in the UAE?
ANS: Under a limited contract, you must complete the agreed term (usually 2 or 3 years) to be eligible for full gratuity benefits.
Q3: Can I resign after 6 months in the UAE limited contract?
ANS: Yes, you can resign after 6 months, but you won’t be entitled to gratuity unless you’ve completed at least one full year of service.
Q4: Can I resign after 1 year in UAE limited contract?
ANS: Yes, you can resign after completing 1 year under a UAE limited contract, and you’ll be eligible for gratuity payment as per UAE Labour Law, provided you give proper notice and follow contract terms.
Q5: Is notice period included in gratuity UAE?
ANS: The notice period is not included in gratuity calculation; it’s treated as a separate part of your final settlement.
Q6: Can I resign before my contract ends?
ANS: You can resign before your contract ends, but you may need to compensate your employer or forfeit part of your gratuity, depending on your contract terms.
Q7: How do I check if my contract is limited or unlimited in the UAE?
ANS: You can check your contract type by reviewing your employment contract or offer letter, which clearly states whether it’s limited or unlimited under UAE Labour Law.