Recruitment agencies

The recruitment industry exists to provide employers with access to a 'pool' of candidates fitting a certain specification or to assist in identifying and securing individuals with a particular skills or industry profile. Fees are paid by the client organisation and typically are calculated as a percentage of the candidate's gross remuneration package.


The recruitment industry is effectively 'tiered' into three groups of businesses. These are high-street employment agencies, search & selection firms and top-level search firms.

  • Employment agencies are 'candidate-driven' in that they actively market candidates to potential employers. They usually operate on a contingency basis (no hire = no fee basis) as opposed to being retained by the client organisation. Agencies of this type tend to concentrate on general staff and junior to middle management roles;
  • Specialist search and selection firms will typically offer database search, advertised selection and, possibly, mid-level search services. Fees may be charges on either a success-only contingency or on a retained basis;
  • True senior level search firms operate rigorous 'off-limits' policies to ensure that they can headhunt freely into a range of organisations within a given sector. Fees are exclusively paid on a retained basis.

Problems with the recruitment industry

The recruitment industry is of highly variable quality in terms of both ethical and capability considerations. Problems relating to employment agencies typically arise when the parties fail to specify clearly the arrangement regarding payment for services rendered or how fees are deemed to have been calculated. It is important to review all agency terms and conditions of business submitted to your company. You should also insist that any exceptions or contingencies be spelled out in writing. Request reimbursement of the fee or a free replacement if the employee only works for you for a short time and make sure that any guarantee is in writing for your protection.


The Employment Agencies Act 1973 requires agencies to forward Terms and Conditions to the prospective employer prior to introducing candidates to it. Agencies are also governed by the Conduct of Employment Agencies and Employment Businesses Regulations 2003. To protect your company from these and other problems, the following guidelines are recommended whenever engaging the services of a recruitment firm:

  • Always agree the fee payable upon commencement of the assignment and confirm this in writing;  
  • Ensure that any issues, such as the terms of any rebate are discussed and agreed prior to making an offer to a candidate;  
  • Secure confirmation in writing from employment agencies of terms of payment (as guarantees are usually linked to these);  
  • When several agencies submit the same candidate's details (e.g. CV), you are only obligated to pay the agency that submitted the details first. It is therefore important to ensure that you have a logging system in place as to when and how details were received so that you can prove your position.