Recruitment regulation may be about to change in ways that could directly affect how agencies charge fees, contract with clients, and work with contractors.
The government is currently reviewing the Conduct of Employment Agencies and Employment Businesses Regulations – the core rules that govern how recruitment businesses operate in the UK. For many agencies, these regulations have been largely stable for years, but the current review raises a number of questions that could fundamentally reshape parts of the recruitment model.
The key question is simple:
If the rules change, what happens to the commercial protections agencies currently rely on?
One of the most significant issues being discussed is the future of transfer fees in recruitment. At present, the Conduct Regulations impose strict conditions on when agencies can charge transfer fees to clients who hire a temporary worker permanently. Agencies must provide specific options, including an extended hire period alternative.
If those rules were removed, the consequences could go in two very different directions.On one hand, agencies might gain greater freedom to structure transfer fees without regulatory restriction.On the other hand, there is also the possibility that transfer fees could face tighter restrictions…or even a full ban.
Either outcome would have a major commercial impact for recruitment businesses that rely on temp-to-perm placement models.
Another major question in the consultation relates to the opt-out from the Conduct Regulations.Currently, contractors operating through umbrella companies or personal service companies (PSCs) can choose to opt out of certain protections under the regulations.
For agencies, this opt-out often enables greater commercial flexibility, different payment structures and more streamlined supply arrangements. However, the government is reviewing whether these opt-outs should continue, particularly for umbrella workers.
While some may argue that umbrella companies should not be able to opt out, the impact on PSC contractors could be much wider. If PSCs were also prevented from opting out, agencies could face new operational and contractual constraints when supplying contractors.
Another area under scrutiny is the Key Information Document (KID) requirement. Currently, agencies must provide a KID to workers before agreeing terms with them. The document outlines how the worker will be paid and what deductions may apply.
Some industry voices have argued that the timing of the KID requirement is impractical. Instead, they suggest that KIDs should be provided later in the recruitment process, when payment arrangements are clearer.
There is also debate over whether the obligation should sit with the agency or with the umbrella company, where one is involved in the supply chain.
The government has indicated a broader intention to reduce regulation by 25% across the economy.In theory, that could mean simplifying recruitment rules. But the real question for agencies is whether any reductions will occur in areas that actually benefit the industry, or whether they could create new uncertainty.
The review of the Conduct Regulations relies heavily on umbrella market data collected in 2022 and 2023. However, the recruitment market has already changed significantly since then. The introduction of joint and several liability (JSL) proposals for umbrella company tax compliance could dramatically reshape how labour supply chains operate. If the regulatory review is based on historical data, some in the industry question whether the conclusions will accurately reflect the future market.
For recruitment businesses, these discussions are not abstract policy debates. They relate directly to:
In short, the rules that underpin everyday recruitment operations could change.
Because these issues are still under review, there is an opportunity for agencies to contribute to the conversation.
We will be discussing the potential implications of the Conduct Regulations review at our upcoming Recruitment Law Seminar on 15 April in London. With representatives from the Department for Business and Trade (DBT) attending and speaking, this event provides a rare opportunity for recruiters to hear directly from policymakers, and make their views known.
If these changes could affect your business model, this is the time to engage.
The Conduct of Employment Agencies and Employment Businesses Regulations 2003 set out the legal framework governing recruitment agencies, including transfer fees, contractor protections, and information requirements.
It is not yet clear. The current review could lead to either relaxation of restrictions or tighter limits on transfer fees.
Contractors working through companies (such as PSCs or umbrella companies) can currently opt out of certain Conduct Regulation protections, allowing agencies greater flexibility in how they structure assignments.
A KID explains how a worker will be paid, including any deductions or intermediary arrangements. Agencies must currently provide it before agreeing terms with the worker.
The government consultation ends on 1st May 2026, and further announcements are expected as the review progresses.
