Employment Business vs Employment Agency
Legally these are two different things under the Employment Agencies Act 1973, even though both get called a recruitment agency.
Both are called "recruitment agencies" in everyday speech, but the Employment Agencies Act 1973 defines them separately in section 13.
An employment agency is a business that provides services "for the purpose of finding persons employment with employers or of supplying employers with persons for employment by them". In practice that means finding people jobs directly with employers: the agency introduces a candidate and the client employs them itself. That covers permanent roles and direct fixed-term hires alike.
An employment business, under the section 13(3) definition that currently applies, is the business of "supplying persons in the employment of the person carrying on the business, to act for, and under the control of, other persons in any capacity". In practice that is temporary and contract supply to a client, the hirer. The Act reads "employment" widely, to include a contract for services.
Section 36 of the Employment Rights Act 2025 substitutes a wider definition: the business of "participating in employment arrangements", under which people "in the employment of a person" (any person, not only the supplier) are supplied to act for, and under the control of, a hirer. Because the employer can be someone else, the new wording would reach an umbrella company that employs workers an agency supplies. It is enacted but not yet in force beyond regulation-making: SI 2026/3, regulation 2(17) commenced it from 6 January 2026 only for the purposes of making regulations under the 1973 Act. For everything else, the older definition still applies.
Most recruitment firms that run a temp or contract desk are acting as an employment business for that work, and as an employment agency when they place candidates directly with a client. A single firm is often both.
The label matters because the Conduct Regulations 2003 place some duties on only one of them. For example, only an employment business must give a temporary work-seeker a Key Information Document, and the rules on temp-to-perm fees apply to employment businesses supplying temps. Both are regulated in England, Wales and Scotland, with enforcement by the Fair Work Agency since 7 April 2026.
Regulation of umbrella companies as employment businesses is not yet fully in effect: the government's Employment Rights Act timeline lists regulation of umbrella companies among the measures taking effect in 2027.