- Osome Blog UK
- Starting a Recruitment Agency
How to Start a Recruitment Agency: A Step-by-Step Guide for Success
- Published: 12 November 2025
- 12 min read
- Running a Business
Ruth Dsouza
Author
Ruth Dsouza Prabhu is a content developer who specialises in crafting clear, compelling narratives from complex ideas. With expertise in marketing communications and lifestyle writing, she simplifies business concepts for a wide audience. Her writing blends strategy, storytelling, and thought leadership, always with a focus on clarity, credibility, and meaningful impact.
John Luie Viguilla
Reviewer
John Luie Viguilla is an Account Executive and expert contributor at Osome, bringing a consultative approach to both sales and content. Leveraging his experience in accounting, bookkeeping, and financial services within the fintech industry, John provides UK entrepreneurs with tailored insights and practical guidance to help them achieve their financial objectives. Known for building long-term relationships, he positions himself as a trusted advisor, sharing expertise that empowers business owners to make informed decisions and grow confidently.
Wondering how to start a recruitment agency? This comprehensive guide will walk you through everything you need to know about recruitment businesses. Let’s get started on turning your recruiting business idea into a successful reality.
Key Takeaways
- To start your own recruitment business, assess your readiness, research recruitment fundamentals, draft a business plan, and choose a suitable business model.
- A comprehensive business plan should include market research and financial projections, and is essential for building a successful recruitment agency.
- Technology, effective networking, and competitive fee structures can help attract clients and candidates while ensuring profitability.
What Is a Recruitment Agency?
A recruitment agency is an external agency connecting employers with suitable candidates for job vacancies. Traditional recruitment agencies tend to target specific industries like healthcare, education, web development, and agriculture, to name a few. Specialising in a particular industry allows recruitment agencies to offer specialised services and insights, making them more competitive than general recruiters.
The recruitment sector is further categorised based on the type of recruitment services, including:
- Mass recruitment: placing large numbers of employees in a short period of time
- Executive recruitment: searching for top-level positions
- Permanent recruitment: Seeking permanent, long-term employees
- Temporary recruitment: finding temporary workers for seasonal or project-based needs.
This vertical approach enables recruitment businesses to serve both legacy corporations and new businesses effectively.
Difference Between Employment Agencies and Businesses
In the UK, an employment agency belongs to the recruitment industry, and each operates under slightly different regulations.
Employment agencies connect job seekers with employers looking for permanent staff. Once a candidate is hired, they become an employee of the company — not the agency. This model is typically used for long-term or permanent positions. (Note: different regulations apply to the entertainment and modelling industries.)
Employment businesses supply temporary staff — often referred to as “temps.” They are employed and paid by the business itself even though they work under the supervision of another company.
If a recruitment business offers both permanent and temporary placements, it must comply with regulations governing both employment agencies and employment businesses.
8 Steps to Open a Recruitment Agency in the UK
Starting your own recruitment agency involves a series of deliberate steps. Here are the eight essential steps to guide you through the process of starting a recruitment business in the UK.
1 Assessing your readiness
Assess your knowledge, skills, and experience in the industry and choose your investment areas. You must have a strong understanding of human resources, business, and finance, along with an entrepreneurial mindset, dedication, and resilience. It’s also important to know your financial limits and time commitment, and to have strong interpersonal skills for building client and candidate relationships.
2 Learning recruitment fundamentals
To offer quality recruitment services, one must master candidate sourcing and recruiting methods. Find an accredited course for essential industry knowledge, screening processes, and interview techniques to help you identify the right candidates.
Building a solid network and relationship skills are also key, as they can open you to new opportunities and high-level candidates.
3 Deciding your recruiting business model
Choosing the right business model is critical. Specialised agencies benefit from deep market knowledge and networks. Whether focusing on temporary or permanent roles, your business model should support your long-term growth.
4 Creating a comprehensive business plan
A detailed business plan guides growth. Conduct market research to understand competitors and opportunities. Define your target audience to tailor marketing.
Include financial projections covering revenue, fees and costs involved, and cash flow monitoring. Set clear goals to measure progress.
5 Registering your recruitment company
Register your company by:
- Choosing a name
- Registering with HMRC and Companies House
- Paying the £ 12 registration fee
- Completing the process, usually within hours
- Ensure compliance with relevant laws and select a suitable business structure.
Save time on paperwork by letting Osome handle your company registration from start to finish. We’ll help you decide on the right business structure, register with Companies House and HMRC, and make sure your recruitment agency meets all compliance requirements.
6 Setting up your infrastructure
Set up your agency’s core elements by opening a business bank account to keep finances separate. Create a professional website to attract clients.
While a home office can reduce costs, a physical office space may improve your credibility among employers and talent. A recruitment software to streamline candidate and job management, and integrated communication tools for internal collaboration are also crucial.
7 Investing in branding and marketing
Branding and marketing boost success. Key steps include:
- Building a standout website
- Designing a memorable logo
- Developing a digital marketing strategy
8 Hiring your recruitment team
Start with freelance recruiters. Ensure you can financially support new hires. Consider offering full-time roles with competitive salaries and ongoing professional development to retain top talent.
Recruitment Agency Start Up Costs
Before you officially launch a recruiting business, you must understand the initial investments required for the company and set enough money aside. These are one-time costs required to set up your business, including registration, branding, technology, and legal support.
Category | Estimated Cost | Notes |
|---|---|---|
| Company registration | £ 50 | Register your recruitment agency with Companies House. |
| Recruitment website | £ 500– £ 5,000 | Cost depends on design complexity and platform. |
| Domain registration | £ 20 | Annual cost for your website domain. |
| Computer hardware | £ 1,000 | Laptop, monitors, desk, webcam, microphone. |
| Branding & social media | £ 80– £ 1,000 | Logo, brand identity, style guide. |
| Legal costs | £ 500 | Solicitor for contracts and policies. |
| Mobile phone bill | £ 500– £ 1,000 | Business phone for client communication. |
Estimated total startup costs: £ 2,650– £ 8,570
Running a recruiting business also comes with ongoing monthly expenses. These costs include CRM software, recruitment technology tools, office software, and lead generation services. Budgeting for these recurring costs is crucial for sustainable growth and day-to-day operations.
Ongoing costs (monthly) | Estimated Cost | Notes |
|---|---|---|
| Recruitment CRM | £ 90– £ 150 per user | Manage client and candidate relationships. |
| Recruitment technology tools | Variable | CV parsing, AI matching, chatbots. |
| Computer software | £ 30 per user | Office suite, antivirus, and software licenses. |
| Lead generation tools | £ 40– £ 60 per user | Access to client contact information. |
Estimated total ongoing costs per user per month: £ 160– £ 240+
Legal and Regulatory Requirements in the UK
Recruitment agencies must comply with strict rules to protect workers and ensure fair practices. These regulations differ depending on whether your agency supplies permanent staff or temps.
Key rules for employment agencies and businesses
- Recruiters cannot charge agency workers for finding them work, withhold wages, or make unlawful deductions.
- Recruitment businesses are legally required to ensure recruits are paid regular salaries, receive holiday and sick pay, work no more than 48 hours a week (unless they opt out), earn at least the National Minimum Wage, are granted sick leave, and are protected under health and safety laws.
- All employees should receive a key information document and written terms of engagement before starting, as well as a written statement when beginning work.
Payment responsibilities
- Employment agencies (recruiters) introduce potential candidates to employers. The employer is responsible for payroll and benefits.
- Employment businesses (staffing agencies) employ and compensate temps regardless of whether the employer has paid the agency. This also means you will be providing the employee with necessary paperwork for tax returns.
Expert accountants on your side
Our local team of experts helps founders get their set-up, taxes and paperwork right from the start
Licensing requirements
Certain types of agencies need additional licences:
- Gangmaster licensing for agencies supplying employees in agriculture, horticulture, shellfish gathering, forestry, and food processing.
- Nursing and domiciliary care agencies may need to be registered depending on location: CQC in England, Care Inspectorate in Wales, SCSWIS in Scotland, and the Regulation and Quality Improvement Authority in Northern Ireland.
Terms, conditions, and limited company workers
- Employment businesses must agree terms and conditions with work-seekers before finding work, covering compensation, type of work, notice periods, holiday entitlement, and contractual arrangements.
- These rules generally cover limited company contractors unless they opt out, but the rules always apply if they work with vulnerable people.
- Companies may place the new recruit on probationary hire for the first six months.
Exceptions
- Social recruitment that searches for universities, local councils, trade unions, charities, and certain HM forces or prison-related services is not restricted by these rules.
- Publications dedicated to work-finding services must comply, but job boards with occasional listings usually do not.
We’ve seen a growing number of staffing and outsourcing companies, particularly from Asia, registering UK entities to strengthen their credibility with European clients. Having a UK company makes it easier to issue invoices locally and present themselves as trusted partners in the region. At Osome, we help these businesses incorporate quickly and stay compliant, so they can focus on scaling their operations and winning new clients.
Account Executive
Fees to Hiring Companies
If your recruitment agency operates as an employment business, you can sometimes charge a transfer fee (or “temp-to-perm” fee) when a hirer offers a permanent role to a worker you supplied. All fees and conditions must be clearly stated in your contract with the hirer.
You can charge a transfer fee only if:
- The contract allows hirer to extend the assignment.
- The hirer does not choose the extension.
- The permanent job is offered within eight weeks of the assignment ending, or within 14 weeks of the assignment starting (whichever comes later).
- For multiple assignments with gaps of more than 42 days, the later assignment is treated as a new initial assignment.
Example
A temp is supplied to a company for a 4-week assignment. The hirer must pay a transfer fee if they offer the worker a permanent role immediately, unless they choose to extend the assignment for an additional 6 weeks. The transfer fee can be made now, extend the assignment for 6 more weeks, or wait the required 10-week period before recruiting the worker directly.
Other fees you can charge include:
- Temp-to-temp fee: if the worker moves to another employment business.
- Temp-to-third-party fee: if the worker is introduced to a third party.
- Introduction fee: if you introduce a worker to a hirer without supplying them.
You cannot charge transfer fees outside these situations. Hirers may reclaim any fees paid in violation of the rules.
Scaling Your Recruiting Business
Scaling your recruiting business requires steady revenue and maximising profit margins through effective pricing. Outsourcing back-office functions can help manage workload and improve efficiency as your agency grows.
Attracting clients and candidates
Attract clients and candidates through cold calling, networking, and LinkedIn. Use job ads, social media, referrals, and CV databases to find candidates. Building a strong reputation boosts trust and credibility.
Utilising technology in recruitment
Use technology tools like talent intelligence systems, applicant tracking, job aggregators, and video interviews to streamline recruitment. Automation reduces routine tasks, letting recruiters focus on relationships and improving candidate experience.
Setting your fees
Set competitive fees based on a percentage of the candidate’s first annual salary, typically 15% to 20%. Fees for difficult roles can reach 30%. Retainer fees may be required at different recruitment stages. Pricing should attract clients while ensuring profitability. Employers in the UK cover recruitment fees.
How Osome Can Help
Starting a recruitment or staffing agency in the UK can feel complex — especially if you’re expanding from abroad. Osome helps simplify the process by managing every step of company formation and compliance.
We assist with:
- Choosing the right business structure to fit your agency’s model, whether you’re hiring locally or supplying remote staff from overseas.
- Registering your company with Companies House.
- Setting up accounting and bookkeeping, ensuring compliance with tax and hiring regulations.
- Assisting with opening a business bank account, so you can invoice UK and EU clients seamlessly.
Many international staffing and outsourcing firms establish a UK entity to enhance credibility and issue invoices under a trusted UK company name. With Osome’s expert support, you can do the same — building client trust and expanding into the European market while we handle the administrative details.
Summary
By following the eight essential steps outlined above, you will lay a strong foundation for your own business before you begin to hire people. Understanding the costs, navigating legal requirements, having a professional website, and utilising technology will further enhance your agency’s growth potential.
Ruth Dsouza Prabhu is a content developer who specialises in crafting clear, compelling narratives from complex ideas. With expertise in marketing communications and lifestyle writing, she simplifies business concepts for a wide audience. Her writing blends strategy, storytelling, and thought leadership, always with a focus on clarity, credibility, and meaningful impact.
