Last reviewed: 4 October 2026. This guide is general information, not legal advice. The outline below is a starting point to review with a solicitor, not a ready-to-use legal document.
TL;DR
- Terms of business are the contract between your agency and your client. They decide whether you get paid, when, and what happens if the candidate leaves or is hired directly.
- Perm: fee basis, when it is earned, payment terms, and a rebate or replacement clause that you define, because the law does not.
- Temp-to-perm: a transfer fee is only enforceable if the client can choose an extended hire period instead, and only within 8 weeks after the last day or 14 weeks after the first day, whichever is later (regulation 10).
- Contractors: timesheet sign-off, the Conduct Regulations opt-out, the client's IR35 status determination, and information for the 12-week equal treatment rule.
- The REC publishes model contracts for its members. If you are a member, start there.
Before you start: one set of terms per model
The Recruitment and Employment Confederation (REC) publishes model contracts and supporting documents for its members, organised by recruitment model: permanent recruitment, PAYE agency workers, umbrella company workers and limited company contractors. That structure is a good guide on its own. Terms for perm introductions and terms for the supply of contractors do different jobs, and many agencies keep separate documents, or one combined document with clearly separate sections.
Remember the distinction that drives the law: when you introduce a candidate who the client then employs, you act as an employment agency; when you supply a worker who works under the client's direction, you act as an employment business. GOV.UK explains that a business doing both has to follow the rules for both.
The clauses below are an annotated outline. Square brackets mark the choices you must make.
1. Definitions
"Introduction" means passing to the Client any information that identifies a Candidate, including a CV or a name, whether written or oral.
"Engagement" means the employment or engagement of a Candidate by the Client or any third party to whom the Client passed the Introduction, whether permanent, fixed-term or temporary, directly or through another business.
"Remuneration" means [the guaranteed annual salary / the first-year package, including [list: guaranteed bonus, car allowance…]].
Why it matters: most fee disputes come down to these three words. A narrow definition of Introduction lets a client argue they "already knew" the candidate; a vague Remuneration clause invites argument about bonuses and allowances.
2. Acceptance of terms
These Terms apply to every Introduction and supply by the Agency and prevail over any terms of the Client. The Client accepts these Terms by [signing them / interviewing or engaging a Candidate introduced by the Agency / accepting the supply of a Worker].
Why it matters: the Conduct Regulations no longer require a written agreement with the client in every case, but the temp-to-perm fee in section 5 only works if your contract with the client provides for it. Keep evidence of acceptance before the first CV is sent.
3. Permanent placement fee
The Client will pay a fee of [X]% of the Candidate's Remuneration [or a fixed fee of £[amount]], plus VAT, on Engagement. The fee is invoiced on [the date the offer is accepted / the Candidate's start date] and is payable within [number] days of the invoice date.
If the Client engages a Candidate within [12] months of the Introduction, the fee is due whether or not the Agency was involved in the final negotiations.
Why it matters: choose when the fee is earned (offer accepted or start date) and say so. If you split the fee into instalments, for example part at the start date and the balance later, write each milestone and the amount attached to it.
4. Rebate, refund or replacement
If the Candidate's Engagement ends within [number] weeks of the start date, other than for redundancy or [other excluded reasons], the Agency will [refund / credit / provide a replacement Candidate] according to the following scale: [for example: weeks 0–4: [X]%; weeks 5–8: [Y]%; weeks 9–12: [Z]%].
This clause applies only if: (a) the fee was paid in full by its due date; (b) the Client notifies the Agency in writing within [7] days of the Engagement ending; and (c) the Client does not re-engage the Candidate within [12] months.
Why it matters: no law requires a rebate. It is a commercial guarantee, and its conditions are where disputes start. Tying it to payment on time gives the client a reason to pay promptly.
5. Temp-to-perm transfer fee (regulation 10)
For workers you supply, this is the clause that the law shapes most tightly. Under regulation 10 of the Conduct Regulations, any term making a fee payable when the client takes on your worker is unenforceable unless:
- the contract gives the client the option, instead of the fee, of an extended hire period of a stated length, on terms no less favourable than before; and
- the worker starts with the client within the relevant period: 8 weeks from the day after their last day worked through you, or 14 weeks from their first day, whichever ends later. When counting the 14 weeks, ignore any supply before a gap of more than 42 days.
An outline that follows those rules:
If, during an Assignment or within the Relevant Period, the Client engages the Worker directly, or through another employment business, or introduces the Worker to a third party who engages them, the Client will pay a Transfer Fee of [X]% of the Worker's first-year Remuneration [or £[amount]], plus VAT.
Instead of paying the Transfer Fee, the Client may, by written notice before the Engagement, elect for an Extended Hire Period of [number] weeks, during which the Agency will supply the Worker on the same terms as immediately before the notice. No Transfer Fee will then be payable on the Engagement at the end of that period.
"Relevant Period" means whichever ends later of: (a) 8 weeks from the day after the Worker last worked for the Client through the Agency; and (b) 14 weeks from the first day the Worker worked for the Client through the Agency, disregarding any supply before a period of more than 42 days in which the Worker did not work for the Client through the Agency.
Why it matters: GOV.UK warns that an agency cannot try to charge a transfer fee in any other situation, and that hirers can recover fees paid against the rules. During the extended hire period you must keep supplying the worker unless that is not your fault, and you cannot raise your rates. The rules come from the GB regulations; Northern Ireland has its own Conduct Regulations.
Note that the client must, from day one, tell your workers about relevant permanent vacancies (AWR reg. 13). This clause decides what happens when one of them applies. Our guide to agency worker regulations in the UK covers that right and the 12-week rule.
6. Contractor and temporary worker clauses
Rates, timesheets and sign-off
The Client will pay the Agency the charge rate of £[amount] per [day / half-day] set out in the Assignment Details, plus VAT. The Client will approve or reject each timesheet within [number] working days of receiving it, giving reasons for any rejection. The Agency's records of approved timesheets are evidence of the time worked.
Why it matters: an employment business must pay its workers for all the work they do, "even if you have not been paid by the hirer or the work-seeker has not got a timesheet authorised by the hirer". Your terms should therefore make sign-off quick and give you evidence when a client goes silent.
Information for equal treatment (AWR)
Before the Assignment starts and on request, the Client will provide the information the Agency reasonably needs about the basic working and employment conditions of comparable employees, so that the Agency can comply with the Agency Workers Regulations 2010.
Why it matters: under AWR regulation 14, an agency can avoid liability for an equal treatment breach if it obtained, or took reasonable steps to obtain, this information and acted reasonably on it.
Limited company contractors and the opt-out
Where the Worker provides services through their own limited company, the Agency will inform the Client before the supply if the company and the Worker have agreed that the Conduct Regulations do not apply.
Why it matters: a limited company contractor can opt out of the Conduct Regulations, but the client must be told, the opt-out cannot be made a condition of finding work, and it is not available for work with vulnerable people (reg. 32). The Key Information Document still applies.
IR35 status determination
Where the off-payroll working rules apply to the Client, the Client will provide a status determination statement, with reasons, for each Assignment before it starts and promptly on any change.
Why it matters: when the off-payroll rules apply, HMRC says the client is responsible for determining the worker's employment status and should produce a status determination statement. Small clients outside the public sector are treated differently, so ask clients to confirm which case applies. The REC's model contracts for limited company contractors include separate terms for inside and outside IR35 engagements.
7. Payment terms and late payment
Invoices are payable within [30] days of the invoice date. The Agency may charge interest on late payments under the Late Payment of Commercial Debts (Interest) Act 1998, together with the fixed compensation it provides.
Why it matters: if you write your own interest rate into the contract, you cannot also claim statutory interest. Our guide to late payment of invoices in the UK explains the 8% rule, the £40, £70 and £100 sums and the reform before Parliament.
8. The clauses a solicitor will add
- Liability: limits, exclusions and the insurance behind them.
- Data protection: how candidate data is shared and protected.
- Non-solicitation of your staff, confidentiality and use of CVs.
- Termination of the terms and of individual assignments.
- Governing law and jurisdiction: England and Wales, Scotland or Northern Ireland. The rules differ, and so does the right template.
Where Marvin fits
Terms of business only pay off if day-to-day practice follows them. In Marvin, Cash drafts the placement fee invoice when a candidate is hired and lets you split it into instalments that your team issues when each milestone is reached; credit notes handle rebates. On contract desks, contractors fill in monthly timesheets in days and half-days, the client signs them from a secure link without an account, and each signature is stored with a snapshot of what was signed. See our guides to timesheet software for recruitment agencies and contract and temp recruitment software.
Marvin does not draft your terms of business, track transfer-fee periods, decide IR35 status, run payroll or record hourly timesheets. Before relying on Cash for invoicing, check with us how it fits your currency and VAT set-up. Book a demo to see placements and invoices on your own data.
Frequently asked questions
Is there an official template for recruitment terms of business?
There is no government template. The Recruitment and Employment Confederation (REC) publishes model contracts and supporting documents for its members, including terms of business for permanent recruitment, for the supply of PAYE agency workers and for limited company contractors.
Do my terms of business have to be signed by the client?
The Conduct Regulations no longer prescribe a written agreement with the client in general, but a temp-to-perm transfer fee is only enforceable if the contract with the client provides for it, with the option of an extended hire period. In practice, you need evidence that the client accepted your terms before the first introduction or supply.
How long after an assignment can I charge a temp-to-perm fee?
Only within the relevant period of regulation 10: 8 weeks from the day after the worker last worked for the client through you, or 14 weeks from the first day of the supply, whichever ends later. Supplies before a gap of more than 42 days are ignored when counting the 14 weeks.
Is a rebate or free replacement on perm fees required by law?
No. A rebate, refund or free replacement when a candidate leaves early is a commercial term that you choose to offer. Write its conditions precisely: the period, the scale, the reasons that exclude it and the deadline for the client to tell you.
Can I use this outline as it is?
No. It is a starting point to discuss with a solicitor, not a ready-to-use legal document. Terms of business depend on your recruitment model, your clients and the law of the part of the UK that governs the contract.
