How to start a recruitment agency in the UK 

Set up properly, then sell

Incorporate at Companies House, register for corporation tax, and register with the ICO as a data controller — recruitment is a personal-data business and UK GDPR obligations apply from your first CV.

Insurance is not optional in practice: professional indemnity, public liability and, once you have staff, employers' liability. Most client PSL applications ask for certificates before they will consider you, so arrange cover before you pitch rather than after you win.

• —Companies House incorporation and corporation tax registration
• —ICO registration as a data controller
• —Professional indemnity, public liability, employers' liability
• —Terms of business for clients and terms with work-seekers
• —A compliance process for right-to-work checks

The Conduct Regulations in plain terms

The Conduct of Employment Agencies and Employment Businesses Regulations govern how UK agencies deal with work-seekers and hirers. In practice they require you to agree terms with work-seekers before providing services, to be clear whether you are acting as an agency (perm) or an employment business (temp), to make required checks, and to avoid charging work-seekers fees for finding work in most circumstances.

The regulations also restrict withholding payment to a temporary worker because a client has not paid you or because of missing timesheets alone. Founders discover this the hard way in their first bad-debt week, which is another reason funding matters more than optimism.

Contractors, IR35 and umbrella arrangements

If you place contractors, understand who carries the off-payroll working (IR35) determination and liability in your supply chain, and document it. The position differs depending on client size and structure, and getting it wrong creates retrospective exposure that resurfaces in any future sale.

Many agencies work with umbrella companies. Be selective: liability and reputational risk flow back up the chain, and non-compliant umbrella arrangements have caused significant problems for agencies that assumed the umbrella carried the whole risk. Check the provider properly and keep the audit trail.

Perm or contract for the first desk

Permanent placement invoices on start date, needs almost no working capital, and can fund the business from month one — but revenue restarts at zero every quarter and rebate clauses can claw it back.

Contract and temporary work builds recurring gross profit and is what buyers pay the strongest multiples for, but you pay workers weekly against 30 to 60 day client terms. That gap needs invoice finance or a recruitment back-office provider before your first placement, not after.

Pick a niche and prove it in ninety days

The founders who make it past year one almost always start where they already have credibility. Choose a vertical where you can name twenty target clients today, where the role is genuinely hard to fill, and where the same client hires repeatedly.

Set a ninety-day test with real numbers: conversations booked, roles taken, placements made and gross profit banked. If the niche does not respond, change it while the cost of changing is still low.

The steps, in order

1. 01

   Incorporate and register

   Form the company, register for corporation tax and register with the ICO as a data controller.

2. 02

   Get insured

   Arrange professional indemnity, public liability and employers' liability cover before pitching for PSL places.

3. 03

   Draft compliant terms

   Put client terms of business and work-seeker terms in place that satisfy the Conduct Regulations.

4. 04

   Decide perm or contract

   Start perm to self-fund, or secure invoice finance or a back-office provider first if you are going contract.

5. 05

   Choose one niche

   Select a vertical where you can name twenty target clients today and roles repeat.

6. 06

   Run a ninety-day proof

   Track conversations, roles taken, placements and gross profit, and change the niche early if it does not respond.

Questions founders ask