Staffing Agency Fee Agreement Template for England and Wales

A staffing agency fee agreement documents the fees the agency charges a client for its recruitment or worker-supply services. It specifies the fee structure (hourly margin, placement percentage, or fixed retainer), when fees become payable, payment terms, VAT treatment, late payment consequences, and any rebates or refunds if a placement is unsuccessful.

Temporary staffing agencies typically charge a mark-up on the worker's pay rate, expressed as a percentage or a fixed margin per hour. Permanent placement agencies charge a one-off fee on a candidate's first-year salary (commonly 10%-25%). Retained search firms charge a series of stage payments regardless of outcome. The fee agreement should state the model, the rates, and any minimum charges per assignment.

No. Section 6 of the Employment Agencies Act 1973 prohibits employment businesses from charging work-seekers a fee for finding them work. Agencies may charge workers for specific ancillary services (such as DBS check processing or accommodation) in limited circumstances set out in the Conduct Regulations, but cannot make these a condition of finding the worker employment.

The supply of staff by a staffing agency is a standard-rated supply for UK VAT purposes under the Value Added Tax Act 1994. The VAT treatment of the mark-up and gross charge depends on whether the agency is supplying a service (standard-rated) or acting as a disclosed agent (different treatment). The fee agreement should clearly state whether quoted amounts are VAT-inclusive or exclusive.

Under the Late Payment of Commercial Debts (Interest) Act 1998, agencies are entitled to charge statutory interest at 8% above the Bank of England base rate on commercial debts unpaid after 30 days from invoice (or the date specified in the contract). The agency may also claim reasonable debt recovery costs. The fee agreement should confirm these rights or specify a contractual interest rate.

The agreement should require the client to raise any disputed invoice in writing within a defined period of receipt (commonly 14 days), stating the specific grounds of dispute. Undisputed amounts should remain payable on time. A dispute resolution procedure (negotiation, then expert determination, then litigation) prevents the client from withholding entire invoices where only part of the fee is genuinely in dispute.

Placement fee rebates are usually calculated on a sliding scale during the guarantee period. A common structure is 100% rebate if the candidate leaves in the first four weeks, reducing to 50% between weeks five and eight, and 0% after twelve weeks. The fee agreement should specify the trigger conditions (resignation, dismissal, redundancy) and whether the rebate is a cash refund or a credit towards a replacement search.

Yes, agencies typically limit liability to the value of the fee paid for the relevant placement and exclude consequential losses such as recruitment costs, operational disruption, and lost revenue. Under the Unfair Contract Terms Act 1977, liability exclusions in commercial contracts must satisfy a reasonableness test. Courts assess the relative bargaining power and available alternatives when evaluating reasonableness.