How to Start a Recruitment Agency in the UK

Is Starting a Recruitment Agency Right for You?

Recruitment is one of the most common businesses for people to start from inside the industry, and for good reason. The barriers to entry are low, a good consultant already knows hiring managers and candidates in a sector, and a single permanent placement can pay a meaningful fee. Agencies that do well are specialists: they know one profession or industry deeply, speak its language and can find people who are not actively looking. Generalists compete with the job boards and the big names on price alone.

The realities are less glamorous than the fees suggest. Permanent recruitment is feast and famine: months of work can end with a candidate accepting a counter-offer, and rebate clauses mean a fee is not safe until the new starter has stayed. Temporary recruitment is steadier but turns you into an employer and a payroll operation, with workers to pay every week whether or not the client has paid you. Hiring slows whenever the economy wobbles, so the first year needs a cash buffer, patience and a thick skin.

Most founders have a few years as a consultant behind them, a specialism and a handful of clients who would use them again. If that is you, check your current contract for restrictive covenants before you resign, because non-solicitation clauses are common and enforced. If you are new to recruitment, work for an agency first, learn how placements are really made and how terms are negotiated, and build the network that will become your first client list. Courses exist through the REC and others, but the trade is learned on the phone.

Qualifications, Registrations and Rules

• The Conduct Regulations and who enforces them. The Conduct of Employment Agencies and Employment Businesses Regulations 2003 govern recruiters in Great Britain: written terms with candidates and clients before you act for them, identity and suitability checks, paying temps even when the client has not paid you, and limits on temp-to-perm fees. Since April 2026 the Fair Work Agency has enforced them. Northern Ireland has its own regulations and inspectorate.
• Employment agency or employment business. An employment agency introduces candidates to a client who then employs them, and earns a fee for the introduction. An employment business engages workers itself and supplies them to a client who controls their work, so it is the employer and runs the payroll. Many agencies do both. Every advert and your terms must say which you are acting as, so decide first.
• Adverts, fees and Key Information Documents. Job adverts must carry your full business name and state whether you are acting as an employment agency or an employment business. Charging work-seekers for finding them work is prohibited, with narrow exceptions in entertainment and modelling. An employment business must give every agency worker a Key Information Document setting out who pays them and what deductions apply before agreeing terms.
• Agency workers' rights. If you supply temps, the Agency Workers Regulations give them day-one rights to facilities and vacancy information, and equal pay and basic conditions after the qualifying period in the same role. As their employer you also handle holiday pay, statutory payments, pension auto-enrolment, right to work checks and the National Minimum Wage, and the Employment Rights Act 2025 is adding more, so follow current GOV.UK guidance.
• Sector licences and checks. Most recruitment needs no licence, but supplying workers to agriculture, horticulture, shellfish gathering or food and drink processing and packaging requires a gangmasters licence, now issued through the Fair Work Agency, and operating without one is a criminal offence. Placing people to work with children or vulnerable adults means confirming qualifications and references under the Conduct Regulations and arranging DBS or equivalent checks.
• IR35 and umbrella companies. If you supply limited company contractors, the off-payroll working rules may make the client responsible for the status decision and your agency, as fee-payer, responsible for deducting tax when a role is inside IR35. Where umbrella companies pay your workers, rules that took effect in April 2026 can make the agency jointly liable for PAYE the umbrella fails to pay, so vet umbrellas carefully and take an accountant's advice.

Setting Up the Business

• Limited company, usually. Most recruitment agencies trade as a limited company registered at Companies House. Clients' procurement teams expect it, it separates your finances from a business that may employ dozens of temps, and invoice finance providers prefer it. A sole trader can run a small permanent desk, but once you employ workers the company route makes more sense. Take an accountant's advice before you register.
• HMRC, VAT and PAYE. Register for Corporation Tax and, if you will employ anyone including temps, set up a PAYE scheme and a workplace pension before the first timesheet. VAT catches temp agencies early because the whole invoice to the client, including the workers' pay, counts as your turnover, so you are likely to pass the registration threshold published on GOV.UK quickly and may prefer to register from the start.
• Bank, bookkeeping and credit control. Open a business account before you trade and consider a second account for the VAT and PAYE you collect but do not own. Bookkeeping for a temp agency means timesheets, weekly payroll, invoices and credit control, so choose software that handles timesheets and payroll or integrates with a back-office provider, and do the credit control yourself at first to learn which clients pay late.
• Insurance. Professional indemnity insurance covers claims that a placement went wrong through your negligence, and many clients' terms require it. Employers' liability is a legal requirement once you employ anyone, and for an employment business that includes every temp on your payroll. Add public liability, cyber cover given the personal data you hold, and specialist cover such as drivers' negligence if you supply drivers.
• Data protection and the ICO fee. CVs, right to work documents, references and interview notes are personal data, and health or criminal record information is special category data. You need a lawful basis for holding it, a privacy notice candidates see, retention periods you keep to and secure systems, and most agencies must pay the data protection fee to the Information Commissioner's Office. Candidates can ask to see it all, so keep notes professional.
• Terms of business and software. Your terms of business are the contract that gets you paid, so have a solicitor who knows recruitment draft them: fee triggers, rebate periods, temp-to-perm arrangements, payment terms and what happens when a client hires a candidate you introduced earlier. You also need an applicant tracking system or CRM, job board and LinkedIn access, timesheet and payroll tools for temps and a compliance checklist for every placement.

Start-up Costs and What You Need

A permanent desk can start lean: a laptop, a phone, an applicant tracking system, job board credits, a LinkedIn subscription, insurance, company formation, the ICO fee, a website and your terms drafted by a solicitor. The real cost is time, because the first fee may be months away and you need to live in the meantime. Add a trade body membership if you want it, and budget for the sector events where your clients actually are.

Temporary recruitment is a different proposition, because you fund the payroll. Workers are paid weekly, clients pay their invoices weeks later, and the gap grows with every temp you place. Many agencies bridge it with invoice finance, where a lender advances most of each invoice when it is raised, or with a back-office provider that funds and runs the payroll for a share of the margin. Compare the real cost of each against your expected margin, remembering pension contributions and employers' National Insurance.

Pricing Your Work

Permanent recruitment is usually charged as a percentage of the candidate's first-year salary, payable when they start, with a rebate or free replacement if they leave within an agreed period. Retained assignments, where part of the fee is paid up front, are common for senior roles and give you income before the placement. Temporary recruitment earns a margin on every hour worked: you charge the client an hourly rate that covers the worker's pay, holiday pay, employers' National Insurance, pension and your profit.

Set your fee from what the work costs you and the value of a hard-to-fill role, not from what the biggest agency in your sector charges. A specialist who finds a candidate nobody else can is worth a higher percentage, while a volume temp desk lives on thin margins. Agree the fee, the rebate terms and the payment terms in writing before you send a CV, because a CV sent without agreed terms is the most common way new agencies lose a fee.

Temp-to-perm fees, when a client wants to take a temp on permanently, are limited by the Conduct Regulations, which require you to offer the client an extended hire period as an alternative to paying a transfer fee, so build that into your terms. Be transparent with workers too: the Key Information Document must show how their pay is calculated and what is deducted. Clear, consistent pricing wins repeat business from clients tired of haggling.

Finding Your First Customers

• The sector you already know. Your first clients are usually hiring managers you have worked with before, in the sector you specialised in. They know you deliver, which matters more than a company name. Check your previous employment contract for non-solicitation and non-dealing clauses first, because breaching them is the fastest way to start a business with a legal dispute.
• LinkedIn, done properly. LinkedIn is where both your clients and your candidates spend their working days. A complete profile that says what you specialise in, regular posts about your market rather than about yourself, and direct, personal messages to people you can genuinely help bring enquiries over months. Automated mass messaging does the opposite.
• Candidates who bring clients. In recruitment the candidate is also a marketing channel. A strong candidate with a rare skill can be introduced to employers with no advertised vacancy, which is how specialist agencies open doors, and candidates you place well become hiring managers who call you later. Treat every candidate as a future client and tell them the truth.
• Job boards and your own website. Job boards and aggregators bring candidates rather than clients, and they charge per advert or by subscription, so test one or two against the roles you actually fill. Every advert should link to your website, where the candidate can see the agency is real, read the privacy notice and register. Clients check the site too before returning a call.
• Business development, every day. Agencies that grow make calls every day to companies in their niche, follow up on roles companies have advertised themselves, and ask every placed candidate and satisfied client for an introduction. It is unglamorous and mostly rejected, but agencies that stop when they get busy have nothing when the current placements end.

Your Website and Online Presence

A recruitment website serves two audiences. Hiring managers want to know your specialism, who you have placed and who the consultants are, and candidates want to see real, current vacancies, understand what happens to their CV and apply in a minute on their phone. That means a jobs board fed from your applicant tracking system, separate employer and candidate pages, your specialisms stated plainly, and the compliance basics: your full company name, whether you act as an employment agency or employment business, and a privacy notice for candidates.

Have it live before you approach your first client, because a hiring manager who searches your name and finds nothing will assume the worst. Choose the domain with care using the domain name guide, work through the startup website checklist before launch, and read how to get a new website found on Google, because niche searches for your specialism plus recruitment are winnable. We build websites for recruitment agencies and know what both audiences need.

When you are ready for a website, our startup recruitment agency website design page explains what a new recruitment agency needs on day one, our recruitment agency website design page covers the full picture for an established business, and recruitment agency website design prices sets out what it costs. Startup websites start from £2,400, and our startup website checklist lists what to have ready.

Mistakes New Recruitment Agencies Make

• Sending a CV before terms are agreed in writing, then arguing about the fee when the client hires the candidate.
• Advertising roles without stating the full company name and whether you act as an employment agency or employment business, which breaches the Conduct Regulations.
• Taking on temps without the working capital or invoice finance to pay them every week, and discovering the client pays on its own schedule.
• Hoarding candidate data for years with no retention policy, no privacy notice and no ICO registration.
• Covering every sector and every level because any fee is welcome, so you become a generalist competing on price with everyone.
• Stopping business development the moment the desk is busy, so the pipeline is empty when the current placements complete.

Your First 90 Days

1. Choose your specialism, decide whether you will run permanent, temporary or both, and write a one-page plan with the fixed costs and the placements a month they require.
2. Check your current employment contract for restrictive covenants and take advice on what you can and cannot do with former clients and candidates.
3. Register the limited company, open a business bank account, register for Corporation Tax and, if employing temps, set up PAYE and a workplace pension, with an accountant's advice.
4. Have a recruitment solicitor draft your client terms of business and candidate terms, including rebate periods, temp-to-perm arrangements and payment terms.
5. Pay the ICO data protection fee, write your privacy notice and retention policy and set up your applicant tracking system to enforce them.
6. Arrange professional indemnity, employers' liability, public liability and cyber insurance, and any specialist cover your niche needs.
7. Prepare your Key Information Document template, your right to work and reference checking process and your advert template with the required name and status wording.
8. If you will run temps, arrange invoice finance or a back-office payroll provider and model the cash flow for the first three months of timesheets.
9. Get the website live with a jobs page, employer and candidate journeys and your compliance details, with a name and look from the branding guide, then complete your LinkedIn profile to match.
10. Start business development on day one, with calls to your network, LinkedIn activity and candidate conversations every day, and review at ninety days which activity produced placements.