Recruitment Agency Contract Template UK
Recruitment agencies operating in the UK face a persistent risk: placing candidates without a watertight agreement exposes them to unpaid fees, disputed terms, and costly legal battles over rebate periods and exclusivity. A robust recruitment agency contract template resolves this by clearly defining fee structures, replacement guarantees, and candidate ownership from the outset. Under the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003, agencies must operate within strict legal boundaries when supplying workers or introducing candidates to clients. Additionally, late payment protection under the Late Payment of Commercial Debts Act 1998 ensures agencies can recover interest on overdue invoices. Whether you run a contingency desk or retained search practice, a legally sound contract protects your revenue and your reputation. Generate your recruitment agency contract now.
Generate your Recruiter Terms of Business free →Key clauses in a Recruiter Terms of Business
Fee Structure and Payment Terms
This clause defines the recruiter's placement fee, whether calculated as a percentage of starting salary or a fixed retained amount, and sets the payment deadline. Under the Late Payment of Commercial Debts Act 1998, agencies are entitled to claim statutory interest at 8% above the Bank of England base rate on overdue invoices, making precise payment terms essential to enforcing this right.
Rebate and Replacement Period
This clause specifies the conditions under which a client may claim a fee rebate or free replacement if a placed candidate leaves within a defined period, typically 8 to 12 weeks. Without clearly drafted rebate thresholds and exclusions — such as redundancy or client-side dismissal — agencies risk unlimited liability for refunds, leaving fee income dangerously exposed.
Candidate Ownership and Off-Limits
This clause establishes that any candidate introduced by the agency remains the agency's introduction for a specified period, preventing clients from hiring that candidate directly to avoid paying a fee. This is particularly important under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, which governs the disclosure of terms before introductions are made, as failing to serve terms in time can extinguish the fee entitlement entirely.
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Generate free →Frequently asked questions
Do UK recruitment agencies need a signed contract before introducing candidates to a client?
Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, an employment agency must agree its terms of business with a client before, or at the same time as, making a candidate introduction. If signed terms are not in place before the introduction, the agency may lose its legal right to claim a placement fee. Sending terms by email and obtaining written confirmation is the safest approach.
Can a recruitment agency charge VAT on its placement fees?
Yes, recruitment agency placement fees are subject to VAT at the standard rate of 20%, and the agency must be VAT-registered if its taxable turnover exceeds the current HMRC threshold, which stands at £90,000 for the 2024/25 tax year. The contract should clearly state whether fees are quoted exclusive or inclusive of VAT to avoid disputes on invoicing. HMRC's VAT Notice 701/34 covers employment businesses and agencies specifically.
What is the difference between an employment agency and an employment business under UK law?
Under the Employment Agencies Act 1973, an employment agency introduces candidates to clients for direct, permanent hire, whereas an employment business supplies temporary workers who remain on the agency's payroll or under its contractual control during the assignment. This distinction is legally significant because employment businesses must provide workers with a key information document under the Agency Workers Regulations 2010, and different obligations around pay, holiday, and IR35 status apply to temporary supply arrangements.
The information on this page is for general informational purposes only and does not constitute legal advice. Contracto generates AI-assisted contract templates — they are not a substitute for advice from a qualified solicitor. For high-value or complex engagements, always seek independent legal review.