Retirement is one of the few situations where a commercial sales agent can bring their own agency to an end and still walk away with a significant payment. Under the Commercial Agents (Council Directive) Regulations 1993, an agent who resigns normally gives up any right to compensation or an indemnity. Retirement on grounds of age, infirmity or illness is the key exception, and the sums involved can be substantial, in some cases three to four times a year’s commission.
The catch is that the Regulations never set a retirement age. They do not even use the word “retire”. Only one UK case has tested the point directly, which leaves a good deal of grey area, and getting a step wrong, such as serving notice too early, can cost an agent the very payment they were retiring to claim.
Over the years several specialist UK agency-law solicitors have contributed their thoughts on this subject to AgentBase. We have brought the most useful of them together here, each looking at a different part of the picture. The short answers below give you the lie of the land, and the full contributions that follow set out the detail in the contributors’ own words. This is general information, not legal advice, and every situation turns on its own facts, so take specialist advice before acting.
On this page
The short answers about Sales Agents & Retirement
Can an agent retire and still claim compensation or an indemnity?
Usually yes, but only where the retirement is genuinely down to age, infirmity or illness, such that the agent cannot reasonably be required to carry on. An agent who simply resigns for other reasons normally loses the entitlement. Kevin Manship’s contribution below covers this in the most depth.
Is there a set retirement age?
No. The Regulations do not fix one. The single court case on the point, Abbott v Condici (2005), treated 65 as a natural retirement milestone, but the default retirement age was abolished in 2011 and the State Pension age has since risen (66 as at 2026, moving towards 67 later this decade), so the position is less settled than it once was.
What if the agent keeps doing some work after retiring?
It depends on the work. A demanding new role, similar to the agency in commitment and pressure, makes it harder to argue the agent could not reasonably continue. A few light hours, a voluntary role, or something closer to a hobby is far less likely to affect the claim. Suzanne Carr’s contribution looks at this directly.
How much could a retirement claim be worth?
Potentially a great deal. The payout can run to three or four times the agent’s annual commission, which is exactly why the timing and the paperwork matter. Andrew Leach’s contribution sets out the figures and the principal’s side of it.
What should an agent do first?
Raise it informally with the principal and, if you can, get any agreement in writing before serving formal notice. A retirement notice cannot be withdrawn without the principal’s consent, so serving it prematurely, before you know you qualify, is a real risk. Gather evidence early, especially a medical opinion where health is the reason.
What if the agent is a limited company rather than an individual?
A company cannot grow old or fall ill, so the age-and-health exception does not apply to it. One alternative is for the agency itself to be sold on to a replacement agent, with the principal’s agreement, in place of a compensation claim.
Is compensation the only thing an agent can claim on retirement?
No. Alongside compensation or an indemnity, a retiring agent may also be owed notice and any commission still in the pipeline at the date they stop. David Bentley’s contribution covers these easily-missed entitlements, and why the timing of a retirement notice matters so much.
1. Retiring and claiming under the Regulations: the full picture
Contributed by Kevin Manship, Solicitor, Peter Dovey & Co Solicitors (2021)
I’m often approached by commercial sales agents who are thinking about retiring. One of the most common questions they ask is whether they would still be able to claim compensation or indemnity under the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”) if they decide to retire.
It is not always easy to give a straight answer to what, from the sales agent’s perspective, is a simple question. There are a few reasons for this:
- The Regulations don’t specify an age from which an agent could reasonably expect to retire; in fact the Regulations don’t actually use the word “retire” at all.
- The general position under the Regulations is that where an agent terminates the sales agency contract, they lose their entitlement to claim indemnity or compensation. There are some exceptions to this general rule which are linked to age or poor health and I will discuss these further below.
- Those exceptions do not apply where the sales agent is a company. A company cannot become old or suffer from poor health. But there might be an option available where the sales agent is a company and the owner wants to retire.
It is always worth checking whether the sales agency contract itself permits the agent to terminate the contract and claim compensation or indemnity upon reaching a specific age or due to illness etc. Many contracts do cover these issues.
In what circumstances could an agent retire and still claim indemnity or compensation?
The Regulations say that where an agent terminates their sales agency contract, they can still claim for indemnity or compensation provided their termination is justified “on grounds of the age, infirmity or illness of the commercial agent in consequence of which he cannot reasonably be required to continue his activities”.
It seems clear from the words used that the sales agent must be able to show that it would be unreasonable to require them to continue to perform their obligations under the sales agency contract as a result of the sales agent’s age and / or state of health. That link between age / poor health and it being unreasonable to require the agent to continue their activities seems important.
Surprisingly, the UK Courts have only had to deal with one case relating to these issues. That was back in 2005. In that case, at the age of 65 the agent had given notice terminating his agency contract because he intended to retire. He was in good health, so the question the Court had to consider was whether the agent could still claim compensation or indemnity after terminating his agency contract due to his age.
The Judge commented that age alone was sufficient to trigger the test of reasonableness and if the age was a reasonable retirement age, a sales agent would not have to prove much more. The Judge concluded that the sales agent could not reasonably be required to continue his activities beyond what was recognised as his appropriate retirement age, the age of 65 was a retirement milestone and it was reasonable for the agent to retire.
At the time of that decision, 65 was the statutory retirement age. However, since then the statutory retirement age has been abolished and people can continue to work for longer. This might affect how a Judge would approach the same issue now. They might still consider 65 to be a reasonable age for an agent to stop their activities, or they might decide that the age at which the state pension becomes payable in the UK (currently at 66 for both men and women) could be taken as a reasonable age. They might decide that age by itself is not a sufficient reason and that all of the relevant circumstances of the particular agent need to be taken into account.
This uncertainty results in risk for the sales agent. If an agent notifies their principal that they wish to terminate their sales agency contract because they have reached the age of 65 and wish to retire, they would not be able to withdraw that notification unless the principal agrees. If a Court subsequently finds that it’s not reasonable for the agent to stop their activities because they have reached the age of 65, the agent would lose their ability to claim indemnity or compensation.
The position is usually more straightforward where the agent’s health is the reason for retirement, whether or not age is also a factor. If the state of the sales agent’s health genuinely affects the agent’s ability to carry out their duties under their agency contract, they could terminate the contract and still be able to claim compensation or indemnity. The position would be quite straightforward where, for example, the sales agency involves a great deal of heavy lifting and / or requires the sales agent to drive long distances.
What can an agent do to protect their position?
Clearly, it is important for an agent to avoid doing something which might affect their right to claim compensation or indemnity.
As I first step, I would recommend that the sales agent raises the subject informally with the principal – “I’m thinking about retiring because I’m [X] years old, or my health is worsening and I’m struggling with the hours / lifting / driving etc. I understand that if I do retire for these reasons, I would still be able to claim [compensation or indemnity] under the Commercial Agents Regulations. What are your views on this?”.
If the principal doesn’t have a problem with this approach, the situation can probably be resolved quickly. It would be sensible for the parties to put something down in writing confirming their agreement. This could include some or all of the following:
- The date on which the sales agent will retire and an acknowledgement of the reasons for that (age, ill health etc).
- The principal’s agreement to that retirement and confirmation that indemnity or compensation will still be payable.
- If possible, the amount that the principal would pay for the indemnity or compensation claim.
This would be the ideal situation for the sales agent. However, if the principal does have a problem with that approach, the agent will know that they have to produce evidence to support their position before they take any steps to terminate the sales agency contract. At that stage, both parties should get independent legal advice.
The evidence needed by the sales agent would depend on the reason(s) for wanting to retire. The sales agent would need to produce evidence which shows that the agent’s age and / or health affects their ability to carry out their duties under the agency. An obvious example is that if there are health related reasons, getting a formal medical opinion would be very helpful.
An alternative option
Where the commercial agent is a company or the agent is not otherwise able to terminate the sales agency contract due to age or ill health, there is another potential option. The sales agent could sell their agency to another person.
This could only be done with agreement of the principal, which means that the principal would have to be happy with the proposed replacement sales agent. Before agreeing, it seems likely that the principal would want to carry out some due diligence on the proposed sales agent, which could involve an interview at the very least.
If the principal agrees to the sale, the commercial agent would not be entitled to claim indemnity or compensation under the Regulations but would instead receive whatever sale price can be negotiated with the replacement agent.
This happens quite often in EU countries, particularly in Germany, but is a relatively rare occurrence in the UK. It can be tricky because it requires the principal’s agreement and also depends on whether the sales agent and replacement agent can negotiate a sale price. But if it is the only option available to an agent who wants to retire, it is certainly worth thinking about.
Kevin Manship
Solicitor
Peter Dovey and Co Solicitors | 14 Old Square | Lincoln’s Inn | London | WC2A 3UE | United Kingdom
Email: kevinmanship@pdcosol.com
Office: +44 (0)207 078 7363
Mobile: +44 (0)7778 010574
2. Can you keep working after you retire?
If an agent terminates the agency contract, he will lose his entitlement to compensation under Regulation 17 of the Commercial Agents Regulations other than in certain scenarios. One of those scenarios is where the agent retires on the grounds of age, infirmity or illness. However, for the agent to remain entitled to compensation from his principal under the Regulations, he must be able to show that his age, infirmity or illness means he cannot reasonably be required to continue his activities.
If an agent is suffering from severe ill health, it may be relatively easy for the agent to show he cannot reasonably be required to continue his activities, whereas retirement on the grounds of age can be more tricky.
Default retirement age
There is no default retirement age in the UK, and the Regulations do not state at what age an agent may retire and still claim compensation. It is clear from cases where the court has considered agents who have terminated their agency on the grounds of age that each case will be decided on its own particular facts.
It is likely that an agent who has reached state pension age of 65 would be deemed to have reached reasonable retirement age entitling them to terminate their agency and still claim compensation, but what if the agent intends to continue with other agency activities, or another different type of role for which he is remunerated? Does that mean the agent loses his entitlement to claim compensation under Regulation 17 because he has not retired from all paid work?
This is a question for which there is no definite answer. If the agent plans to continue working in any capacity following retirement from the agency, this must be considered carefully, as it could potentially inhibit a claim for compensation.
Comparing the agent’s planned post termination activities to the agency role
The agent’s circumstances must be considered on an individual basis. If the agent intends to continue to perform another significant role after termination of the agency (whether that is an agency or other type of role), which involves a similar level of commitment, stress and pressure, it will be much more difficult for the agent to demonstrate that in consequence of his age he cannot reasonably be required to carry on his agency activities.
The principal may argue that the agent has effectively not retired at all. It may in those circumstances be legitimately able to avoid paying Regulation 17 compensation on the grounds that the termination of the agency is not justified on the grounds of age, in consequence of which the agent cannot reasonably be required to continue his activities (Regulation 18).
On the other hand, if the agent plans to carry out a role after termination which is in no way analogous to the agency role he is retiring from (for example a part-time role involving a few hours per week with no travel, sales targets or reporting commitments, or even a voluntary role), such activities are less likely to affect the agent’s entitlement to claim compensation upon termination of his agency. The right to compensation should not be affected provided the agent can evidence that the role is less demanding and time consuming than the agency role being terminated, especially if the new role is considered more of a hobby to fill the retirement years as opposed to anything financially driven.
Does ‘retirement’ from an agency mean retiring altogether?
It is perfectly feasible that an agent’s age means he cannot reasonably be required to continue his agency activities. His age does not necessarily mean he cannot perform a different type of role. The more demanding the agency role, both in terms of time commitment and pressure, the easier it is likely to be for the agent to demonstrate that he should be entitled to retire from his agency due to his age and still claim compensation, whilst still engaging in other retirement activities.
It is recommended that an agent considering retirement on the grounds of age seek legal advice before taking steps to terminate, to ensure any entitlements under the Regulations are preserved.
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Suzanne Carr
Senior Associate
Myerson Solicitors LLP
Grosvenor House, 20 Barrington Road, Altrincham, WA14 1HB
Tel: 0161 941 4000
www.myerson.co.uk
Suzanne.Carr@myerson.co.uk
3. Timing, notice and pipeline commission
Retirement – When & How?
Business owners routinely plan for their retirement, or otherwise develop exit or succession route strategies, and commercial sales agents will be no different as to that. As far as individual sales agents are concerned, however, a pertinent question to ask is as to whether they are fully aware as to the possibilities to claim compensation/an indemnity upon retirement under the Commercial Agents Regulations and, if so, how to proceed to go about that.
What I am referring to is the right of individual agents to retire in appropriate qualifying circumstances, and otherwise when, pursuant to Regulation 18(b) (ii) of the Commercial Agents Regulations, in consequence of their age, they cannot reasonably be required to any longer carry out their activities. Then, having duly retired, to claim the appropriate form and amount of compensation.
Obviously, the benefit to an agent of being able to retire as per the above scenario and (at the same time) to be entitled to claim a compensation payment, could be financially very significant indeed, and should consequently therefore be very much borne in mind, although carefully considered before being put into plan (both as to timing and, more generally, as to how the whole retirement strategy will be commenced and executed).
The above explained, the Commercial Agents Regulations unhelpfully do not actually specify any particular age when entitled agents are deemed to be sufficiently old (to then be able to rely on their age in retiring and claiming compensation), and whereas the Court’s controversial decision in the case from earlier this century of Abbott v Condici Limited and Another stated that, in general terms, a commercial agent cannot reasonably be required to continue his activities beyond what is recognised to be his or her appropriate retirement age (which the Judge decided in that case to be the then milestone age of 65), recognising what that retirement age is today (and setting aside the debatable Abbott decision) is not straightforward (not least because of the removal of the default retirement age, and the ongoing changes with the State Pension Age).
Given the above and bearing in mind the potentially significant financial pay-out possibilities in respect to retirement compensation, all circumstances need to be carefully considered before any steps are taken.
For example, if (before having taken specialist legal advice) an agent had already sent notices of retirement to each of his principals in circumstances where, for some legal reason, he subsequently discovers that he wasn’t actually going to be entitled (either at that point or ever) to any form of compensation (including because, as one example, he didn’t satisfy the test laid out in Regulation 18(b) (ii)) he wouldn’t subsequently then be able to retract the retirement notice without the relevant principal’s consent. In other words: – no entitlement to compensation, and now no longer any agency.
I should also make the point that for any agent who may have a written agreement with his principal, retirement might actually have been dealt with in that agency contract (e.g.:- setting out an agreed age for retirement) and so that it is important to understand what any written agreement may provide for, and consider that in the context of the Commercial Agents Regulations.
Other than considering and keeping in mind the above issues, the main factors in determining the amount of compensation or an indemnity under the Regulations are the same as they would otherwise be in respect to any other claim following the termination of an agency.
Finally, keep in mind also that potentially being entitled to retire from your agencies and receive compensation is one of the few exceptions to the ‘golden rule’ that agents should ordinarily never terminate their own contracts, and also that, in addition to compensation, entitled agents should also make sure that they are similarly aware as to the notice provisions of the Regulations, as well as their possible entitlement to claim for commissions in the pipeline as at the date of termination (retirement). In other words, it isn’t only about claiming money just for compensation.
The above all explained, the summary message is that making a claim for compensation on retirement could provide entitled agents with a well-earned financial pay-off, but, as always, and at the same time, remember to take legal advice before acting.
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© David Bentley, Bentley Agency Law Limited, Bentley & Co Solicitors, 7 Littlemoor Road, Pudsey, Leeds, LS28 8AF
T: – 0113 236 0550 e-mail:- db@bentleyandco-solicitors.com.
The ONLY law which we practice is the law as it relates to commercial agents.
Please note that, as far as we can, we take cases on on a “success related fee”.
Please ensure that you obtain legal advice before acting in reliance upon anything in this article, particularly since each individual’s circumstances may necessitate a unique approach, and also on account of the fact that the law may of course at any time change. Furthermore, please be very clear that the answers given in this column may not cover or otherwise refer to all possible angles, aspects, relevant information and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon.
4. How much a retirement claim is worth, and the principal’s view
Commercial Agents can benefit from substantial payment when their agency contracts come to an end – and usually this entitlement remains when an agent retires. As a result, if an agent properly plans his retirement he could be in for a large lump sum payment when he gives up work.
The right to compensation or an indemnity arises under the Commercial Agents (Council Directive) Regulations 1993 (“Regulations”). When an agent terminates the contract himself, or can no longer perform his role, by “reason of age, infirmity or illness…in consequence of which he cannot reasonably be required to continue his activities” he will usually be entitled to an indemnity or compensatory pay-out. The payment can be up to 3 or 4 times the annual commission. However, the Regulations do not set out when an agent will reach an age where he “cannot reasonably be required to continue his activities”, and in the UK, there is no default retirement age. In one case, Abbott v Condici [2005] 2 Lloyd’s Rep 450, the Court held that although there might be exceptional cases, in general an agent could not reasonably be required to continue his activities beyond what was recognised as his appropriate retirement age.
The Court found that age of 65 was a reasonable age for an agent to retire and remain entitled to a post-termination payment under the Regulations, as the age of 65 was “embedded as a retirement milestone”.
The case was decided before the default retirement age of 65 was abolished in April 2011 and it is questionable whether this will remain the case. That said, the abolition of the retirement age was intended to prevent discrimination by an employer based on a person’s age by preventing the employer from dismissing them solely because of their age. Clearly, that is not directly analogous to a situation where an agent wants to retire because of his age.
Clearly whether an agent can reasonably be required to continue his activities depends entirely on the circumstances; if an agent is required to travel the length and breadth of the country every week it may be reasonable to decide he cannot reasonably be expected to do so if he is 70 years old; on the other hand, what happens if the agent makes one call a week not far from his home? Clearly from an agent’s perspective, he will wish to retain his right to indemnity or compensation and retire at a reasonable age to enjoy the benefit of his work throughout his years. From the principal’s perspective, they need to consider how they may reduce or even avoid the risk of paying out compensation or indemnity to an agent who is approaching retirement age.
For both principals and agents, careful consideration is required of the best way to protect your position. DWF’s commercial agency team is highly specialised in advising on issues arising out of the Regulations. We take a strategic approach and provide practical and commercial advice. We have extensive experience in acting for principals and agents in relation to issues arising upon the termination of the agency contract, including dealing with contested claims, liability and valuation issues. We act on all values of claims across all sectors on behalf of both agents and principals and have substantial experience of multi-million pound claims as well as claims involving technical issues such as choice of law and jurisdiction; the applicability of specific regulations; how the Regulations apply in the context of “super-agents” and “sub-agents”; and the calculation of indemnities. If you would like to discuss any of the issues raised in this article please contact Andrew Leach at andrew.leach@dwf.co.uk or by telephone on 0845 404 2564.
One Snowhill
Snowhill Queensway
Birmingham B4 6GA
Tel: 0121 212 2620
www.dwf.co.uk
Andrew Leach
Disclaimer: This column does not contain legal advice and is for general guidance only. Agentbase, DWF LLP and the writer accept no liability in connection with the general guidance given in this column. Please ensure that you obtain legal advice before acting in reliance upon anything in this article. For example, please be clear that the answers given in this column may not cover all possible angles, aspects, relevant considerations and/or points of law and so that all or any information which is given above needs in every instance to be referred for legal advice for clarification and amplification, before being relied upon
Further Reading
Retiring triggers the same lump-sum entitlement as any other termination, in one of two forms. For the difference between them and how each is worked out, see compensation versus an indemnity.
Trading through a limited company can quietly remove the retirement route, because a company cannot become old or ill. For why the entity you contract as matters, see who are you contracting with?
The same entitlement passes to an agent’s estate on death, provided the executor knows to claim it in time. For how that works, see death of a salesman.