Why do recruitment agencies need credit checks on clients?

Because you pay the candidate (salary, NI, pension, holiday pay) before the client pays you. On temp and contract placements, payment terms of 30 to 90 days mean you could have tens or hundreds of thousands outstanding to a single client. If that client enters insolvency, you eat the payroll costs already disbursed. A credit check before placing tells you whether the client can actually pay your invoices.

What happens if a client does not pay agency fees?

You become an unsecured creditor. In a formal insolvency, unsecured creditors recover an average of 3.2p per pound owed. For a temp agency with 10 workers placed at the defaulting client on weekly pay, that could mean £30K to £100K written off in a single event. The payroll has already left your account. You cannot claw it back from the workers.

Can you check a client company before placing candidates?

Yes. All UK limited companies file accounts, confirmation statements, and officer records at Companies House. RecoupIQ aggregates this with gazette notices, CCJs, charge registers, and ML risk analysis to give you a complete picture of client creditworthiness. A Quick Check (£29) takes seconds and covers payment history, director track record, and current risk signals.

How can recruitment agencies protect against late or non-payment?

Four layers: (1) credit check every new client before placing, (2) set a credit limit per client so you never overexpose, (3) shorten payment terms for new or higher-risk clients (30 days not 60), (4) monitor existing clients so you know the moment their financial position deteriorates. RecoupIQ covers checks and monitoring. Pair with credit insurance or factoring for the financial layer.

What is the payment risk for temp agencies specifically?

Temp agencies carry the highest exposure. You pay workers weekly or monthly regardless of whether the client has paid you. A single large client on 60-day terms with 20 workers placed can represent £200K or more of outstanding receivables. If the client defaults, you still owe the workers. This is why temp agencies need per-client credit limits and active monitoring.

Do AWR regulations increase the risk for recruitment agencies?

Yes. Under the Agency Workers Regulations 2010, after 12 weeks the worker gains rights to equal pay and conditions. If a client defaults and you pull workers, you may still have obligations to those workers during any notice period. AWR also means you cannot simply reduce pay to offset the loss. The regulatory burden makes pre-placement credit checks even more important.

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Recruitment

Recruitment Agency Credit Check: Will This Client Pay Your Fees?

You pay the candidate before the client pays you. One bad client can wipe out months of margin. Check companies before you place, and monitor your client book so you know the moment something changes.

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Recruitment agencies carry payroll risk on every placement.

You fund the worker (salary, NI, pension, holiday). The client pays you 30 to 90 days later. If they do not pay at all, you have already spent the money. One default on a major client can cost more than a year of profit.

Check a client company before placing

Enter the company name. See payment risk signals, director history, filing status, and financial health instantly.

Why recruitment agencies are uniquely exposed

You pay the candidate before the client pays you

Salary, employer NI, pension contributions, holiday accrual. All leave your account on payday. The client invoice is not due for weeks or months. You are an unsecured lender to every client.

30 to 90 day payment terms mean massive exposure

A temp agency with 15 workers at one client on 60-day terms can have £150K to £500K outstanding at any moment. That is not a receivable, it is a bet on the client staying solvent.

If the client goes bust, you eat the payroll costs already paid out

Workers have been paid. You cannot ask them for the money back. You join the unsecured creditor queue and recover, on average, 3.2p per pound. The money is gone.

AWR regulations mean you may still owe the worker after client default

After 12 weeks, Agency Workers Regulations give the worker equal treatment rights. You cannot simply cut their pay or remove them without notice, even when the client has stopped paying you.

What to check before placing candidates

Company accounts: can they afford the fees?

Look at cash position, trade debtors (how much others owe them), and creditor days. A company already stretched on cash will stretch your payment terms first.

Payment history: do they pay their suppliers?

CCJs for non-payment signal a pattern. If a company has judgments against it for unpaid invoices, your agency fees will be next. Check before you place.

Director track record: serial failures mean you will not get paid

Directors who have left a trail of dissolved and liquidated companies will repeat the pattern. RecoupIQ maps the full network across all current and historical appointments.

Current risk signals: gazette notices, filing delays

A winding-up petition or overdue accounts mean the company is already in trouble. These signals appear weeks before a formal insolvency. You still have time to pull back.

How to structure protection for your agency

Credit limit per client

Never have more than X outstanding to any single company. Set the limit based on the client credit check. Increase only as payment history builds.

Payment terms: 30 days for new clients

Do not offer 60 or 90 day terms to a company you have no payment history with. Earn extended terms through consistent payment. Reduce terms if signals deteriorate.

Retainer for executive search

For high-value placements (£20K+ fees), take a retainer upfront. This is standard practice and protects you if the client cancels or enters insolvency mid-search.

Regular monitoring

A client that was healthy six months ago may not be today. Monitor your top clients and get alerted within 24 hours of gazette notices, director changes, or late filings.

Use cases

Temp agency, £200K outstanding to one client

You have 20 workers placed at the same company on 60-day terms. A Quick Check reveals a winding-up petition filed last week. You pull workers and cap exposure before the administration is announced.

Executive search firm quoting a £30K fee

Before committing a consultant for 8 weeks, you check the client. Accounts show negative net assets and the director has two previous liquidations. You take a 50% retainer upfront or walk away.

IT contractor checking an umbrella company

You are being asked to join a new umbrella. A check reveals overdue accounts, a gazette notice, and the director ran two previous umbrellas that were struck off. You find a different provider.

Recruitment startup, first enterprise client

This client would be 80% of your revenue. Before signing, you run a Forensic Report (£167). It reveals the company is healthy but growing fast with tight cash. You negotiate 30-day terms instead of 60.

A diverse team talking and working together at a desk in a modern office — Vitaly Gariev / Unsplash

Check a client before you place. One search tells you if they can pay your fees.

72 signals across 12 data sources. Filing patterns, accounts forensics, director network mapping, CCJs, gazette notices. The check that protects your payroll. £29.

Know before you commit your payroll.

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Monitor your entire client book

Pro plan: £149/mo for portfolio monitoring

Monitor all your active clients. Get alerted within 24 hours of gazette notices, director resignations, new charges, status changes, or late filings. Know when a client deteriorates before your next invoice goes unpaid.

Also available as the Microsoft 365 Trust Check app (per-seat for teams). RecoupIQ is a Microsoft partner.

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Related guides

Last reviewed: July 2026. General information for UK recruitment agencies and contractors. Not legal or financial advice. RecoupIQ Ltd, Company No. 16947526, ICO ZC077511. Microsoft Partner.