UAE Labour Law 2026 — Gratuity Changes & Updates You Must Know

Key changes at a glance

• No resignation reductions — Full gratuity for all employees regardless of reason for leaving
• All contracts now fixed-term — Unlimited contracts phased out by December 2023
• Alternative EOSB Savings Scheme — Voluntary investment-based alternative to traditional gratuity
• 14-day payment rule — Stricter enforcement of the payment deadline
• Part-time workers included — Prorated gratuity for part-time employees

Calculate your gratuity under the new law →

The landmark 2022 UAE Labour Law reform

Federal Decree-Law No. 33 of 2021 came into effect on 2 February 2022 and represents the most significant overhaul of UAE labour law in decades. It replaced the old Labour Law (Federal Law No. 8 of 1980) and introduced sweeping changes that benefit employees — particularly around gratuity entitlement.

The law applies to all private sector employees in the UAE mainland and most free zones, supervised by the Ministry of Human Resources and Emiratisation (MOHRE). It does not apply to DIFC and ADGM employees, who have their own separate regulations.

Resignation no longer reduces gratuity

This is the most impactful change for employees. Under the old law, employees who resigned from unlimited contracts received reduced gratuity based on a sliding scale:

Under the new law, all eligible employees receive full gratuity regardless of whether they resigned or were terminated. The only exception remains dismissal for gross misconduct under Article 120.

Calculate your exact entitlement using the free UAE gratuity calculator — updated for 2026 and based on the MOHRE-approved formula.

All contracts are now fixed-term (limited)

The new law abolished the distinction between limited (fixed-term) and unlimited (open-ended) employment contracts. As of December 2023, all UAE employment contracts must be fixed-term with a maximum duration of 3 years (renewable).

This change was phased in over 2022–2023, giving employers time to transition existing unlimited contract employees to the new fixed-term format. Employees who are still on legacy unlimited contracts should have had them converted by now.

Alternative End-of-Service Savings Scheme (2023)

Cabinet Resolution No. 96 of 2023 introduced a voluntary Alternative End-of-Service Benefits Scheme for UAE private sector employees. Instead of receiving a traditional lump-sum gratuity at the end of service, participating employees benefit from monthly employer contributions to approved investment funds.

Part-time employees now eligible for gratuity

Under Cabinet Resolution No. 1 of 2022, part-time employees working under a valid UAE employment contract are now entitled to prorated end-of-service gratuity. Previously, only full-time employees were clearly covered.

This change is particularly significant for employees in the healthcare, education, hospitality, and retail sectors where part-time work is common.

What stayed the same in 2026

• The core formula — 21 days per year for first 5 years, 30 days per year thereafter
• The 2-year cap — Total gratuity cannot exceed 24 months of basic salary
• Basic salary only — Allowances still excluded from the calculation
• 14-day payment rule — Employer must pay within 14 days of last working day
• 1-year minimum — Still required to qualify for any gratuity
• Misconduct forfeiture — Article 120 dismissals still forfeit gratuity rights
• MOHRE oversight — Ministry continues to supervise and enforce compliance

UAE gratuity law — key dates

Calculate your gratuity under the 2026 rules

Our calculator is fully updated for Federal Decree-Law No. 33 of 2021.