Recruitment agency client not paying placement fees: what to do

A placement fee is a business-to-business debt like any other, so a client who will not pay it can be chased with statutory interest, fixed compensation and, if needed, a court claim. What makes recruitment debts different is the arguments: the candidate left, the hire was not through you, or the fee is not owed under your terms. Settle which argument you are facing before you chase, because the answer is almost always in your terms of business.

Start with your terms of business

Every placement fee dispute comes back to the contract between you and the client. Find the version they accepted and how they accepted it: a signed copy, an email confirming them, or terms sent with the first CV saying that interviewing a candidate counts as acceptance. A client who says they never agreed to your terms is usually in a weaker position if they went on to interview and hire after receiving them, but the clearer your record, the shorter the argument.

Then check the clauses that matter for this invoice:

• When the fee becomes due: on the offer being accepted, on the start date, or on a set number of days after the invoice.
• How it is calculated: a percentage of first-year salary, and what counts as salary (basic only, or with bonus and car allowance).
• The rebate or refund clause: what happens if the candidate leaves early, and the conditions attached to it.
• The introduction clause: how long after you send a CV a hire still earns you a fee.
• Payment terms: how many days the client has to pay, and from when.

If your terms are thin on any of these, our guide to payment terms that stop customers paying late covers what to tighten for the next client.

The three disputes you will meet

”The candidate left, so we are not paying”

This is the most common one. A rebate clause usually gives the client a partial refund or credit on a sliding scale if the candidate leaves within an agreed period. It rarely wipes out the whole fee, and most clauses only apply if the client paid on time and told you within a few days of the departure. Read the clause, write to the client setting out exactly what it gives them, and invoice or chase the rest. If you offer a free replacement instead of a refund, say so and offer it.

”We found them ourselves”

When a client hires someone you introduced without telling you, or says the candidate applied to them directly, the question is whether your introduction came first and falls inside the period your terms cover. Put the timeline together: when you sent the CV, the client’s reply, any interview you arranged, and when the candidate started. If the client saw the CV from you first and your terms cover that, the fee is usually owed, even if the candidate also applied another way.

”The fee is too high”

Usually a salary argument: the client says the package was lower, or that bonus should not count. Ask for the offer letter or the salary they confirmed to you, and recalculate on that basis if they are right. A fee that is correct and simply unwelcome is not a dispute, and our guide to keeping recovery on track when a customer disputes the invoice explains how to collect any part that is not in question while the rest is settled.

A word on temp-to-perm fees

If you are an employment business supplying temps, a transfer fee for taking a temp on permanently is controlled by law, not just your contract. Under regulation 10 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003, the fee is unenforceable unless your terms give the client the option of an extended period of hire instead, and it cannot be charged at all if the temp starts working for the client directly after the later of two periods has ended: 8 weeks from the day after the temp’s last day with the client, or 14 weeks from their first day there. The fee is also lost if the client chooses the extended hire and you do not then supply the temp for it, unless you were in no way at fault. These rules apply to employment businesses supplying temps, not to the fee for a straight permanent introduction. Check a transfer fee against them before you chase it: a court will not enforce a fee the regulations make unenforceable, a collection agency should not take it on, and the regulations also bar you from asking for it.

Chase with interest and a deadline

Once you know the fee is owed, chase it on a schedule. A placement fee is invoiced to a business, so statutory interest at 8% plus the Bank of England base rate runs from the day after the due date, and you can add fixed compensation per invoice: £40 under £1,000, £70 from £1,000 to £9,999.99, and £100 at £10,000 or more. Our late payment calculator works out both and produces a letter.

A sensible sequence is a reminder the day after the due date, a firmer message adding interest a week later, and a letter before action with a final deadline after that. If the client is a sole trader rather than a company, the Pre-Action Protocol for Debt Claims applies and they get 30 days to respond to that letter.

Keep the relationship in mind but do not let it run the timetable. Many clients delay a fee because they are short of cash, and the longer it waits, the further down their list it falls. Check Companies House for overdue accounts or a strike-off notice while you chase, as our guide to clients who are dissolved or insolvent explains.

When to hand it to a collection agency

Hand it over when the client has stopped replying, has made and broken a promise to pay, or is disputing the fee in a way your terms plainly answer. A collection agency’s letter often gets a placement fee paid because it moves the debt from an account manager’s inbox to the client’s finance director, and it does not cost you the next vacancy the way a court claim might. Many work on a no-collection-no-fee basis, and some have a litigation arm that can issue a claim if letters do not work.

Give the agency the accepted terms of business, the CV and introduction emails, the offer or start confirmation, the invoice, and your chasing. That pack is what decides how quickly they can act.

You can compare vetted UK debt collection agencies on Collect Compare, side by side with names hidden until you choose. It is free for creditors: the agency you choose pays for the introduction, and no agency can pay to rank. If you would rather be pointed to one, let us match you.

Time limits

In England and Wales you generally have six years from when the fee fell due to start a claim, restarted only by a signed written acknowledgement or a part payment made before it runs out. That is a backstop, not a plan: how long you can chase an unpaid invoice explains why recovery rates fall long before then.

The short version

Find the terms the client accepted, decide which dispute you are facing, and answer it with your own records. Check any temp-to-perm fee against the regulations. Then chase with interest and a deadline, and hand an unanswered or broken-promise fee to an agency rather than letting it age.

This is general information, not legal advice. Check your own terms of business, and take advice on a disputed fee if the amount justifies it.