Consultation published on reforming the recruitment sector regulatory regime

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On 17 January 2013 the Department for Business Innovation & Skills (BIS) published its consultation on streamlining the legislation that governs the recruitment sector.

This consultation is part of the Government's broader review of employment and workplace laws and it aims to improve growth through labour market flexibility, reduce burdens on business and give businesses the confidence to recruit more people.

The recruitment sector is regulated by the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the Conduct Regulations).  The Government has identified this legislation as ripe for reform because it considers the regulatory framework to be costly, complex and difficult for businesses and individuals to understand.

The consultation seeks views on:

  • When it is appropriate for the Government to impose rules on the recruitment sector and when it is more appropriate for the sector and marketplace to decide the rules for themselves; and
  • Whether individual civil enforcement would be more effective than the current criminal enforcement regime led by BIS's Employment Agency Standards Inspectorate.

Summary of intended outcomes

The Government wants to replace the existing recruitment sector legislation with 'the simplest regulatory framework possible'. In doing so, it considers that the following four outcomes are important and seeks views on whether any other regulatory outcomes should be achieved:

  • recruitment companies are restricted from charging fees to work-seekers;
  • there is clarity on who is responsible for paying temporary workers for the work they have done;
  • the contracts temporary workers have with recruitment companies do not hinder their movement between jobs and the temp-to-perm fees recruitment companies charge hirers are reasonable; and
  • work-seekers have the confidence to use the sector and are able to assert their rights.

Restriction on charging fees to work-seekers fees

The current legislation already prevents most recruitment companies from charging fees to candidates for work-finding services. This would continue under the new legislation. However, BIS is proposing that employment businesses (i.e. recruitment companies that engage people to work on temporary assignments for hirers) should also be prevented from forcing work-seekers to pay for additional services such as accommodation, training or CV writing.

An exception to the current rule exists in the entertainment and modelling sector where the relevant employment agencies (i.e. recruitment companies that place candidates in roles directly with hirers) are allowed to charge up-front fees to candidates in certain circumstances. BIS wants to know whether this exemption should be extended to other sectors and, if so, under what circumstances that exemption should be permitted.

The consultation also seeks views on whether any changes should be made to the broad definition of 'employment agency' in the Employment Agencies Act 1973.

Cooling-off periods

Candidates whom employment agencies are permitted to charge a fee for work-finding services currently benefit from a 30 day cooling-off period during which they can withdraw from a contract before any fee is payable to the employment agency. However, for certain entertainment workers carrying out technical or 'behind the scenes' work, the cooling off period is only seven days. The Government is seeking views as to whether the rules in this area are satisfactory and, in particular, whether the duration of the cooling off period should be standardised.

Clarity on responsibility for paying temporary workers

Temporary workers are supplied under a tripartite arrangement comprising the temporary worker, the employment business and the hirer. BIS is concerned that this relationship, especially when one employment business sub-contracts to another employment business, leaves temporary workers vulnerable to exploitation when it comes to understanding who will pay them.

BIS's proposal would require employment businesses to agree terms with temporary workers in relation to rate of pay, how and when payment for work done would be made and who is responsible for such payment.

No hindrance of movement between jobs and reasonable temp-to-perm fees

Regulation 6 of the Conduct Regulations restricts recruitment companies from penalising a work-seeker for terminating or giving notice to terminate a contract. The Government intends to continue to ensure that temporary workers are able to move freely within the labour market and take up permanent employment without fear of reprisal, but seeks views as to whether the drafting of Regulation 6 could be improved.

The consultation also asks whether Regulation 10, which restricts employment businesses from charging hirers unreasonable transfer fees (i.e. temp-to-perm, temp-to-temp and temp-to-third party fees), could be improved in order to ensure that people are not prevented from moving from temporary to permanent work.

Confidence to use the sector and assertion of rights by work-seekers information sharing

BIS floats the idea that recruitment companies should publish information about themselves either on their own websites or jointly with a trade organisation. It believes that publishing the following information would create greater transparency about business practices and allow hirers and work-seekers to make informed decisions about which recruitment company to use:

  • Feedback/reviews from work-seekers and hirers;
  • The type of occupational sector that the recruitment company operates in; 
  • Size of the business;
  • Staff numbers and locations;
  • Number of jobs/temporary placements available;
  • Number of work-seekers available;
  • Average length of time it takes to fill a vacant post;
  • Average length of placements (employment businesses only);
  • Number of payroll errors (employment businesses only);
  • Operation of client account (for entertainment and modelling agencies); and
  • Equalities policies.

The consultation seeks views on whether access to such information would be helpful to hirers and work-seekers and, if so, what specific information would be of most use and whether its publication ought to be compulsory. BIS also queries whether trade association codes of practice help to maintain standards in the recruitment sector and what other non-regulatory tools could be used to achieve this.


The current recruitment legislation is enforced by the Government's Employment Agency Standards Inspectorate (EASI). This body has the power to request prohibition orders against individuals who run recruitment companies and, in very serious cases, to bring criminal prosecutions for non-compliance.

BIS is seeking views on whether it is necessary for the Government to enforce recruitment sector legislation and, in particular, whether prohibition orders should be included in any new enforcement regime. Furthermore, BIS queries whether the Government should proactively publish the findings of EASI investigations, including naming the infringing recruitment company and detailing the infringements.

Under the current legislation temporary workers can only bring claims in Employment Tribunals to enforce rights under the Agency Workers Regulations, but not rights covered by the Conduct Regulations. The consultation paper asks whether individuals should be able to enforce their rights at Tribunals personally, in order to bring recruitment sector legislation in line with the Agency Workers Regulations.


Finally, views are sought on whether legislation is required in order to compel recruitment companies to keep records demonstrating that they have complied with the new regulatory requirements and, if so, what records.


The overarching theme of this consultation is the proposal of a transition from state enforcement of recruitment sector legislation to a position of self-regulation by recruiters.

The Government is clearly interested in phasing out its policing role in the sector. This is evidenced by its emphasis on promoting individual enforcement whereby Employment Tribunals, as opposed to the EASI, would process and handle work-seekers' claims.

Recruitment companies will welcome a move away from a heavy-handed enforcement regime under which minor procedural infringements are criminal offences. This can cause issues for owners of recruitment companies on an IPO or where they are looking to sell their businesses, including buyers using infringements uncovered by EASI investigations as a reason to reduce the purchase price.

Most recruiters will support the consultation's emphasis on the protection of vulnerable individuals. However, there will be calls for carve outs in relation to the more sophisticated users of recruitment companies' services, such as professional interims and company contractors who are in business on their own account.

Job boards and suppliers of online recruitment related services will be disappointed that there is no express mention of providing greater clarity on the application of the recruitment sector regulatory regime to their businesses. However, these businesses and online service providers such as professional networking sites that are unsure whether or not this regulatory regime applies to them can respond to this opportunity to seek to exclude their businesses from the definition of 'employment agency' in the Employment Agencies Act 1973.

Overall, the consultation has largely been positively received by recruiters and trade bodies for the industry who welcome the move towards greater self-regulation.

The closing date for responses to the consultation is 11 April 2013. BIS will publish a summary of the responses and details of next steps within 12 weeks of this date.

If you would like more information on this consultation on the regulatory framework for the recruitment sector and the potential impact of any new legislation on your business, including any assistance with your response to the consultation, please do not hesitate to contact us.