Comparing Fixed-Term (Limited) Contract and Unlimited Contract (Pre-2022). Data from Federal Decree-Law No. 33 of 2021, MoHRE regulations, and RFS HR Consultancy 2025.
| Factor | Fixed-Term (Limited) Contract | Unlimited Contract (Pre-2022) |
|---|---|---|
| Current Status | Active — required by Decree-Law 33 | Abolished from 2 February 2022 |
| Maximum Term | 3 years initial (renewable) | Previously no time limit |
| Gratuity | 21 days/year (first 5 years) | Same calculation previously applied |
| Probation | Maximum 6 months | Previously 3–6 months typical |
| WPS Obligation | Mandatory monthly | Previously mandatory monthly |
Key Facts
Federal Decree-Law No. 33 of 2021 abolished unlimited contracts from 2 February 2022. All UAE employment contracts are now fixed-term. Existing unlimited contracts required conversion within 12 months.
UAE Labour Law: Federal Decree-Law No. 33 of 2021 governs all mainland employment contracts. The Ministry of Human Resources and Emiratisation (MoHRE) registers every contract.
Frequently Asked Questions
When did UAE abolish unlimited employment contracts?
Federal Decree-Law No. 33 of 2021 came into effect on 2 February 2022 and abolished unlimited employment contracts. All new contracts must be fixed-term with a maximum initial period of 3 years.
Is gratuity different for limited vs unlimited contracts?
No. Gratuity is 21 calendar days of base salary per year for the first 5 years, then 30 days per year. Federal Decree-Law No. 33 of 2021 applies the same formula to all contract types.
What happens if an unlimited contract was not converted?
Employers who did not convert unlimited contracts should update them immediately. The Ministry of Human Resources and Emiratisation (MoHRE) can issue compliance notices to non-compliant employers.
Limited vs Unlimited Contract UAE — What Changed in 2022
Federal Decree-Law No. 33 of 2021 (effective February 2022) significantly changed UAE employment contracts. All new private sector employment contracts must now be limited (fixed-term). The old unlimited contract system is being phased out — existing unlimited contracts must be converted.
Key Changes Under Federal Decree-Law No. 33 of 2021
Practical Impact for UAE Employers
The shift to mandatory limited contracts means employers must manage contract renewal cycles — typically 1–3 years. Failure to renew or issue a new contract before expiry creates legal ambiguity. MoHRE requires all employment contracts to be registered in the system and contracts must match the Wages Protection System records.
For employees who joined before February 2022 on unlimited contracts: their accumulated gratuity under the old contract remains protected. The conversion to a limited contract does not reset their service period for gratuity calculation purposes.