Every Contract a Recruitment Agency Needs in the UK (2026)

Last updated: February 2025

Legal Requirements for a Recruitment Agency

UK recruitment agencies are heavily regulated under the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003. The Agency Workers Regulations 2010 (AWR) grant agency workers equal treatment rights after 12 weeks. IR35 off-payroll working rules require agencies to make status determinations for workers supplied to medium and large end clients. The Gangmasters and Labour Abuse Authority (GLAA) licensing applies to sectors like agriculture, food processing, and shellfish gathering. UK GDPR and the Employment Practices Code apply to candidate data.

Essential Contracts

Terms of Business with Clients

Governs the commercial relationship with hiring companies, covering fees, rebate periods, transfer fees, and liability allocation — must comply with the Conduct Regulations 2003

Candidate Registration Agreement

Must comply with UK GDPR for processing candidate personal data and the Conduct Regulations for providing candidates with specific information before an assignment

Contract for Services (Temporary Workers)

Contract between the agency and temporary workers, covering pay, assignment terms, AWR rights, and the distinction between employment business and employment agency status

IR35 Status Determination Statement

Required when supplying workers to medium and large clients — the agency must pass on the client's determination and deduct PAYE if inside IR35

Recommended Contracts

Introduction Fee Schedule

Clear schedule of permanent placement fees, temp-to-perm conversion fees, and rebate terms to prevent fee disputes

AWR Compliance Documentation

Templates for gathering comparable pay and conditions information from hirers to ensure Agency Workers Regulations compliance after 12 weeks

Preferred Supplier Agreement

Framework agreement with major clients covering volume commitments, exclusive or preferred supply terms, and KPI-based service levels

Common Legal Risks for a Recruitment Agency

  • Employment tribunal claims from agency workers denied AWR equal treatment rights after 12 qualifying weeks
  • HMRC investigations for incorrect IR35 status determinations on supplied workers
  • Fee disputes with clients without clear terms of business and introduction fee schedules
  • UK GDPR fines for mishandling candidate data or sharing CVs without consent
  • Prosecution under the Employment Agencies Act 1973 for charging fees to work-seekers (prohibited in most cases)

Industry-Specific Notes

Recruitment agencies must understand the legal distinction between operating as an 'employment agency' (introducing candidates for direct hire) and an 'employment business' (supplying temporary workers). Different rules apply to each. The Conduct Regulations 2003 prohibit agencies from charging fees to work-seekers except in limited circumstances (entertainment and modelling sectors). Agencies in the care, construction, and driving sectors face additional regulatory scrutiny.

FAQ

What is the difference between an employment agency and an employment business?

Under the Employment Agencies Act 1973, an employment agency introduces candidates to clients for direct employment — the candidate becomes the client's employee. An employment business supplies temporary workers who remain employed by or contracted to the agency while working at the client's premises. Most recruitment firms operate as both. The distinction matters because different regulatory requirements apply, particularly around worker rights, payment, and the Conduct Regulations 2003.

What are a recruitment agency's obligations under the Agency Workers Regulations 2010?

After 12 qualifying weeks in the same role with the same hirer, agency workers are entitled to the same basic working conditions as if they had been recruited directly — including pay, working time, and rest periods. From day one, agency workers are entitled to access shared facilities and information about vacancies. The agency must obtain comparable pay information from the hirer and adjust the worker's pay accordingly. Anti-avoidance rules prevent resetting the 12-week clock through contract manipulation.

Can a recruitment agency charge candidates fees for finding them work?

No, with very limited exceptions. Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, it is prohibited to charge work-seekers fees for finding them employment. The only exceptions are for workers in the entertainment and modelling industries, where fees can be charged for specific additional services like portfolio creation. Charging prohibited fees is a criminal offence. This applies even to 'admin fees' or 'registration fees' — all are prohibited.

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This is guidance, not legal advice. Consult a solicitor for complex matters.

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