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Compliance – all you need to know when starting your Recruitment Agency

By October 27, 2016 One Comment

Ignorance is no defenceget it right from the start.

Being aware of the relevant legislation that affects how you set up and run your recruitment agency is your responsibility. You must make every effort to stay up to date with any laws that may impact upon your business. Whatever size of your agency, you need to ensure that you are operating compliantly as the consequences for getting it wrong can be significant.

Recruitment in a Box takes a look at the most important recruitment legislation you should be aware of before starting your Recruitment Agency.

Employment Agencies Act 1973 (EAA)

This is the parent legislation to everything that has come since and was brought in to regulate the conduct of Employment Agencies at that time. It prohibits most agencies from charging upfront fees, makes it an offence to put out misleading advertising for jobs which do not exist, sets standards for assessing an employee’s experience, and more

Initially it was a requirement for all agencies to be licenced and therefore audited but this was removed in 1994 by the Deregulation and Contracting Out Act 1994. Agencies can still be audited and shut down after investigations by the Employment Agency Standards Inspectorate. The EAA was enhanced and improved by the Act below.

The Conduct of Employment Agencies and Employment Businesses Regulations 2003

These regulations restrict agencies from:

  • selling other services
  • sending workers to employers as strike breakers
  • sharing the agency worker’s personal details
  • advertising jobs which do not exist
  • withholding pay from workers, regardless of whether they have timesheets
  • charging any fees directly to a worker for their work
  • require agencies to document the health and safety standards of employers they send workers to
  • require agencies to give a written statement of the pay and hours they will have, and state their contractual status

These regulations were updated in May 2016.

Gangmasters (Licencing) Act 2004

After the tragedy in Morecambe in this year a new act was introduced to regulate the agencies and other labour providers that place vulnerable workers in agricultural work, and the shellfish collecting and food packing industries. It established the Gangmasters Licencing Authority (GLA), which requires that all such agencies and providers have a licence before they operate, and adhere to proper labour practice standards. Most of its provisions came into effect after 2005.

The GLA has been consulted to extend its licencing framework into other vulnerable employment sectors and this will happen within the next two years.

Working Time Regulations 1998

The 1998 Working Time Regulations specifically apply to agency staff. They include a special definition of agency worker and the provisions concerning minimum paid holiday and obligatory rest breaks as well as the maximum working hours provisions apply to agency workers as to others.

The effect is that either the agency or the principal to whom the agency has supplied the worker will be responsible for ensuring compliance with the regulations and/or Act, depending on which of them is responsible for paying the agency worker. If this is not specified, the one who actually pays is made responsible.

These regulations have been updated regularly in recent years with particular emphasis on mobile workers, specifically including drivers.

Agency Workers Regulations 2010

It’s a legal requirement that a temporary worker placed by an agency receive at least the same treatment as a permanent employee in the same role after completing the qualifying period. It includes pay rate, working hours and employee benefits.

Access to other facilities should be made available by your client to the temporary workers from Day 1. Referred to as Regulation 5.

Agency workers can be asked to opt out of the pay element of these regulations in exchange for receiving a contract of employment with guaranteed payments between assignments – referred to as the Swedish Derogation Model or Regulation 10.

Data Protection Act 1998

You are legally required to have a data protection policy as a Recruitment Company as you keep records of personal data both manually and electronically. You are also required to register your company with the Information Commissioner (ICO) on an annual basis.

Equality Act 2010

It combines into a single act the Sex and Discrimination act, Race Relations Act and the Disability Discrimination Act. It is basically designed to ensure people are treated fairly and equally.

Health & Safety at Work Act 1974

You are required to protect your own employees from any risk whilst performing their duties at work. This includes the specific requirements of your client sites when supplying temporary workers, particularly those operating within the GLA sector.

Disclosure and Barring Service

This service replaced the old Criminal Records Bureau which was brought in to provide a system of checks on people wishing to work with children or vulnerable adults. It combines a series of previously separate checks into one and is now accessible online.

Employment Rights Act 1996

If you have any employees in the business then how you treat them in the workplace is specifically governed by this Act. Certain elements of this act have been incorporated into the Agency Worker Regulations and Conduct Regs.

ITEPA 2003 and Finance Act 2016

If you provide a Contractor/Temporary Worker service to your clients then these particular Acts manage the treatment of the taxation of these workers.

In particular if you utilise the services of intermediaries – Umbrella Companies and PSCs (Limited Companies) – then there is specific legislation requiring the reporting of this.

Immigration, Asylum and Nationality Act 2006

Recruitment Agencies must check the right to work in the UK and the identity of each job seeker before securing a position. Placing an illegal worker can be a costly mistake whether they are on your agency payroll or that you have supplied them as a permanent worker to a client.


It should be fairly obvious, having seen how much legislation impacts upon the Recruitment Industry from all of the above, that starting your own Recruitment Agency takes a little bit more thought and preparation than you may have imagined. Whilst the process of:

  • make sales call
  • get vacancy
  • find candidate
  • place candidate

seems pretty straightforward as a Recruiter do bear in mind that your behaviours in doing this are governed by all of the legislation highlighted above.

Getting any part of this wrong or deliberately ignoring elements of it to make your life easier could see you losing candidates and clients at best and being investigated and shut down at worst.

To make sure you know exactly how to set your Agency up in line with the correct legislation for your industry then please call Recruitment in a Box on 0203 417 3101.



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