Conduct of Employment Agencies Regulations: Fees and Penalties

The Conduct of Employment Agencies and Employment Businesses Regulations 2003, sitting alongside the Employment Agencies Act 1973, set out what UK recruitment firms can and cannot do when placing workers into jobs. They ban charging work-seekers for finding them work, require written terms and detailed assignment information, protect temps from having pay withheld, cap transfer fees when a temp goes permanent, and impose suitability checks before any placement. Breaches are criminal offences, and the worst can end in a ten-year ban from running any recruitment operation.¹

Which Firms the Rules Apply To

The regulations draw a hard line between two kinds of recruitment firm. An employment agency introduces candidates to employers for direct hire, and once the placement is made the worker becomes the hirer’s employee. An employment business employs or engages the worker itself and then supplies them to a client on a temporary basis, so the contract stays with the business, not the site where the work happens.¹

The classification changes which obligations apply. A firm that calls itself an agency but functions as an employment business can end up failing on pay, written terms, and other worker protections. The Fair Work Agency, which took over the work of the Employment Agency Standards Inspectorate, investigates these failures.²

Fees a Recruitment Firm Cannot Charge You

Section 6 of the 1973 Act prohibits recruitment firms from charging workers for finding them a job. The ban covers both agencies and employment businesses. Revenue comes from the hirer. Charging a work-seeker for a job lead is a criminal offence carrying an unlimited fine on indictment.²

Regulation 5 goes further. A firm cannot make its work-finding service conditional on you buying other products or services from it or from anyone connected to it, so a training course, accommodation, or equipment cannot be forced on you as a precondition for being put forward. If you voluntarily take up a paid extra that is not prohibited, you must be allowed to cancel with five business days’ notice, or ten business days for accommodation, with no penalty.³

A narrow exception under Regulation 26 lets agencies charge fees to workers in listed entertainment occupations, including actors, dancers, musicians, singers, other performers, and photographic or fashion models. Even then, the fee can generally only be commission taken from earnings on a job the agency actually found.⁴

Written Terms and Assignment Information

Recruitment firms must agree written terms with work-seekers before providing any work-finding service. Those terms cover the type of work the firm will seek for you, how and when you will be paid, and the notice period for ending the arrangement. Written terms are also required with hirers, covering fees, the nature of the services, and liability for unsatisfactory workers.

Before you start a specific assignment, Regulation 18 requires the firm to give you detailed information about it: the identity and nature of the hirer’s business, when the work starts and how long it is expected to last, the type of work and location, the hours, any known health and safety risks and what the hirer has done about them, required qualifications or authorisations, and any expenses you will have to pay or can claim. For agency placements where you would become the hirer’s employee, this also covers the minimum pay rate, payment intervals, and notice periods.⁵

Anything told to you verbally must be confirmed in writing or by email no later than the end of the third business day after the verbal disclosure. Keep those confirmations. They are the record you will need if a dispute develops later about what you were promised.

Getting Paid as a Temp

Regulation 12 addresses the most common complaint from temporary workers: agencies that delay or withhold pay because the client has not paid its invoice. An employment business cannot withhold any part of your pay because the hirer has not paid the agency. It also cannot withhold pay because you did not produce a signed timesheet, provided the business can confirm the hours some other way.⁶

The four prohibited grounds for withholding pay are the hirer not paying the agency, the worker not producing a signed timesheet where hours can be verified another way, the worker not having worked during a different period, and any matter within the agency’s own control. The financial risk of chasing the client sits with the employment business, not the worker who did the job.⁶

Workers who are not paid on time can bring a breach of contract claim through an employment tribunal or civil court, and can report the agency to the Fair Work Agency for investigation.

Transfer Fees When a Temp Goes Permanent

When a hirer wants to take on a temp worker permanently, or bring them in through a different agency, the original employment business often tries to charge a transfer fee. Regulation 10 does not ban these fees, but it puts strict limits on when they can be enforced. A transfer fee clause is unenforceable unless the contract also gives the hirer the option of an extended hire period instead of paying the fee.⁵

If the hirer takes the extended hire option, the employment business must keep supplying the worker on terms no less favourable than those already in place. And the fee becomes entirely unenforceable once a defined window has passed: whichever ends later of eight weeks after the worker’s last day on assignment, or 14 weeks from the first day the worker was supplied to that hirer. After that, the hirer can take the worker on directly without owing the agency anything.⁵

This is where agencies routinely overreach. Transfer fee demands that arrive months after the worker’s last assignment, or contracts offering no extended hire alternative, are unenforceable. Hirers receiving these invoices should check the contract terms before paying anything.

Suitability and Background Checks

Before introducing or supplying a worker, the recruitment firm must take reasonable steps to confirm the person is suitable for the role. That means verifying identity, confirming the right to work in the UK, and obtaining evidence of any qualifications, training, or professional authorisations that the role requires by law or that the hirer has specified as necessary.¹

The duty does not end at placement. If the firm later receives information suggesting a worker may be unsuitable, or that their qualifications or background have changed, it must inform the hirer without delay. A lapsed professional registration, a failed reference check, or new information about conduct all trigger the duty.

The obligation is more demanding when the worker will be in contact with vulnerable people, meaning anyone under 18 or anyone who needs care or attention because of age, illness, disability, or other circumstances. For those placements the firm must obtain at least two references and take additional steps to confirm the worker poses no risk.¹

Equal Treatment After 12 Weeks

The Agency Workers Regulations 2010 sit alongside the Conduct Regulations. Once you have worked on the same assignment at the same hirer for 12 continuous weeks, you become entitled to the same basic pay, holiday entitlement, working patterns, and rest breaks as comparable permanent employees doing the same or similar work.⁷

Equal pay covers more than the basic hourly rate. It includes holiday pay above the legal minimum, individual performance bonuses, commission, overtime pay, and shift or unsociable-hours allowances. A week counts as any seven-day period in which you work at least one day on the assignment.

Some rights apply from day one. From the start, you are entitled to the same access to collective facilities the hirer provides to its own staff, such as canteens, childcare, and transport, unless the hirer can show an objective justification for excluding you. You also have the right to be told about permanent vacancies at the hirer, so you can apply on the same footing as existing staff.⁷

The old “Swedish derogation,” which let workers give up equal pay in exchange for pay between assignments, was repealed on 6 April 2020. Every agency worker who reaches 12 weeks now qualifies for equal pay, with no opt-out available to the employment business.⁸

Opting Out Through a Limited Company

Workers who supply their services through a limited company, whether a personal service company or an umbrella, can opt out of the Conduct Regulations. The opt-out is all or nothing. You cannot pick which protections to keep. The only obligations that survive are the employment business’s duty to provide a key information document and to keep records showing compliance with the regulations and the 1973 Act.

Both the limited company and the individual who will do the work must give written notice to the employment business or agency before being introduced or supplied to the client. Notice cannot take effect mid-assignment; it only applies from the start of the next one. The opt-out is never available for assignments involving vulnerable people. And an employment business cannot make an assignment conditional on the worker opting out.

Penalties for Breaching the Rules

Breaching the Conduct Regulations is a criminal offence under section 5 of the Employment Agencies Act 1973. A firm convicted on indictment faces an unlimited fine. On summary conviction, the fine is capped at the statutory maximum. Fraudulent record-keeping carries a fine up to level 5 on the standard scale on summary conviction. Individual directors and managers can be prosecuted personally if the offence was committed with their knowledge or through their neglect.²

For serious or repeated misconduct, the Secretary of State can apply to an employment tribunal for a prohibition order under section 3A of the 1973 Act. The order can ban a person from running any employment agency or employment business, or any specified type of recruitment operation, for up to ten years. The tribunal must be satisfied that the person is unsuitable on account of misconduct or another sufficient reason. The order can also target a company if any of its directors, managers, or shadow directors is found unsuitable.²

How to Complain About an Agency

If a recruitment firm has broken the rules, whether by withholding pay, charging an illegal fee, failing to provide written terms, or any other breach, you can report it to the Fair Work Agency. Complaints go through the online form on GOV.UK, by email to contact@fairworkagency.gov.uk, or by phone on 0345 161 6000. The agency aims to acknowledge complaints within five working days and resolve them within six weeks.⁹

One practical limitation: the Fair Work Agency generally cannot investigate anonymously. If you do not give permission to disclose your name to the recruitment firm, the complaint may be logged as intelligence but not actively pursued. Before you complain, gather what you have. Contracts, payslips, timesheets, text messages, and emails with the agency all strengthen the case.⁹

1
Legislation.gov.uk. The Conduct of Employment Agencies and Employment Businesses Regulations 2003
2
Legislation.gov.uk. Employment Agencies Act 1973
3
Legislation.gov.uk. The Conduct of Employment Agencies and Employment Businesses Regulations 2003 – Regulation 5
4
Legislation.gov.uk. The Conduct of Employment Agencies and Employment Businesses Regulations 2003 – Regulation 26
5
Legislation.gov.uk. The Conduct of Employment Agencies and Employment Businesses Regulations 2003 – Draft
6
Legislation.gov.uk. The Conduct of Employment Agencies and Employment Businesses Regulations 2003 – Regulation 12
7
Legislation.gov.uk. The Agency Workers Regulations 2010
8
GOV.UK. RPC Opinion – Agency Workers Regulations Post-Implementation Review
9
GOV.UK. Making a Complaint to the Fair Work Agency About Your Recruitment Agency