15 Dec

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

In the UK, both employment businesses and employment agencies are involved in the recruitment and placement of temporary and permanent workers. However, there are some key differences between the two:

  1. Employment Agency: An employment agency is a business that matches job seekers with permanent or temporary positions. They act as an intermediary between job seekers and employers, helping to fill vacancies by finding suitable candidates for their clients. Employment agencies typically charge a fee to employers for their services.
  2. Employment Business: An employment business, on the other hand, provides temporary workers to clients on a short-term basis. They act as an employer of the temporary workers, and are responsible for paying their wages, taxes, and National Insurance contributions. Employment businesses charge a fee to clients for their services, which typically includes the cost of the workers' salaries.

So, the main difference between an employment agency and an employment business is that an agency is focused on permanent and temporary recruitment, while a business is focused solely on temporary placements and acts as the employer of the temporary workers. 

How are employment businesses and employment agencies regulated in the UK?

In the UK, employment businesses and employment agencies are regulated by the Employment Agencies Act 1973, which was amended by the Conduct of Employment Agencies and Employment Businesses Regulations 2003.

These govern the conduct of the private recruitment industry, and set minimum standards for employment agencies and employment businesses operating from premises in Great Britain (ie England, Wales and Scotland). The Conduct Regulations 2003 apply where an employment agency or an employment business provides work-finding services to a work-seeker.

Neither an employment agency nor an employment business can:

  • charge a fee to a work-seeker for work finding services
  • stop someone from working elsewhere or terminating their contract with you
  • make someone tell them the name of any future employer
  • withhold payments or wages due
  • supply a temporary worker to replace someone taking part in industrial action
  • charge for a uniform without telling the worker in advance
  • make unlawful deductions from pay

They are also required to comply with a range of further regulations, including:

  1. Providing job seekers with accurate and comprehensive information about available positions.
  2. Ensuring that job seekers are not charged for their services.
  3. Adhering to health and safety regulations and providing appropriate training and protective equipment to temporary workers.
  4. Ensuring that temporary workers are paid the minimum wage and that their employment rights are protected.
  5. Keeping accurate records of all transactions and interactions with clients and workers.

The legislation also provides for the inspection and enforcement of these regulations by the Employment Agency Standards (EAS) Inspectorate, which is part of the UK government's Department for Business, Energy and Industrial Strategy (BEIS).

Employment agencies and businesses that fail to comply with the regulations can face penalties, including fines, revocation of their license, and legal action. Therefore, it is important for employment agencies and businesses to operate in compliance with the regulations to avoid any legal or reputational risks.

Setting up an agency or employment business?

For new entrants into the market, it's essential to get advice on the appropriate documentation to be used in your agency or business.

The regulations are complex and have to be complied with and it's important the required procedures are followed. The EAS has extensive powers to investigate and sanction non-compliant companies.  You can start by reading the EAS's Brief Guide for Agencies. 

See also our article on The Employment Conundrum- determining employment status.

Legal Notice:

Publisher: Atkins-Shield Ltd: Company No. 11638521
Registered Office: 71-75, Shelton Street, Covent Garden, London, WC2H 9JQ

Note: This publication does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. The information contained in this document is intended to be for informational purposes and general interest only.


Atkins-Shield Ltd © 2023

* The email will not be published on the website.