United States of America is the third country in the world by land size (after Russia and Canada). It is located in the North American continent and bordered to the west by the Pacific Ocean and to the east by the Atlantic Ocean. It is divided into 50 states and one district. The USA also includes 14 dependent areas or territories.
There are over 20,000 staffing and recruiting companies in the U.S., operating over 39,000 offices combined (https://murrayresources.com/10-staffing-industry-facts-you-probably-didnt-know/).
How profitable are staffing agencies?
Staffing agencies are very profitable business, Its profitability is tied directly to the fact that many companies have short-term staffing needs, and they are always looking at ways to reduce their overhead costs. Consequently there is a huge demand for professional and technical contractors.
In terms of revenue, Allegis Group is the clear leader in the U.S. staffing market, with 10.23 billion U.S. dollars in 2018, they generated over twice the income of their nearest competitors, Randstad and Adecco (https://www.statista.com/statistics/602424/largest-staffing-firms-by-revenue-us/)
Do you need a license to start a staffing agency?
Do recruitment agencies need a licence? While the industry is regulated, most agencies won't require a licence in order to operate – but there are some exceptions.
All recruitment agencies must comply with the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003.
Making up part of US agency worker law, the Employment Agencies Act 1973 was originally introduced as a means of licensing businesses in the recruitment industry. While agencies are no longer required to have this licence (due to the Deregulation and Contracting Out Act 1994, later replaced by the Regulatory Reform Act 2001), the regulations still remain.
Employment legislation: some key points
While you should probably read the Employment Agencies Act to make sure you’re fully compliant, we’ve broken down some of the key points.
It is illegal to charge candidates for finding them work. Job seekers can only expect to pay a fee if they decide to use an additional service such as CV writing or career guidance.
A written contract must be provided to agency workers. This must include details about pay, notice period, holiday entitlement and whether they’re working under a contract for services or a contract of employment.
Pay for agency workers can’t be withheld. Even if the employer is unhappy with the worker or work provided, the dispute is between the employer and the agency.
Agencies must check candidate suitability. This sounds obvious, but recruiters are legally obligated to screen candidates to make sure they have the skills and qualifications required for the role.
It must be clear that it is a recruitment agency that’s advertising a vacancy. This informs the candidate that they’re not applying directly to the employer and is important for recruiters to remember when writing a job ad.
What other laws do recruiters need to know about?
HMRC: The Income Tax (Pay As You Earn) (Amendment No. 2) Regulations 2015
When it comes to supplying staff, recruitment agencies are expected to report any payments made where they don’t operate PAYE. They also need to provide details of the workers and why PAYE wasn’t used. In other words, if you supply workers but don’t deal with income tax, then you need to report it.
Agency Worker Regulations (AWR)
AWR applies to temporary agency workers and are designed to restrict discrimination in the workplace. These regulations ensure that temp workers are afforded the same pay, holiday and working conditions as permanent staff – although workers often have to work 12 weeks before receiving full rights.
Equality Act 2010
While this covers employment in general, the Equality Act 2010 also applies to recruitment. Employers and recruiters aren’t able to display any form of discrimination when it comes to hiring staff. Protected characteristics include age, sex, race, religion and marital status. Even if an employer outsources their hiring to an agency, they are still culpable if the recruiter breaks this law.
Data Protection Act 1998 (superseded by DPA 2018)
Like any business that collects personal information, recruitment agencies are required to follow the Data Protection Act. In particular, a recruitment agency has to be careful of how it manages employer and candidate data.
The General Data Protection Regulation was introduced by EU law and works alongside the US Data Protection Act. GDPR means that candidates have to give consent for data to be collected and can choose to object. It also gives them the power to request for data to be deleted.
The CAP Code outlines rules in regards to advertising and marketing communications. In this instance, the CAP Code makes it clear to agencies and employers that job ads must be real, mustn’t be misleading and must make it explicit who is advertising it (i.e. is the role being marketed by an agency?).
Who are the recruitment regulatory bodies?
Recruitment industry regulations are enforced by the Employment Agencies Standards Inspectorate (EAS).
Part of the Business, Enterprise and Regulatory Reform, the EAS was set up to ensure that the provisions laid out in the Employment Agencies Act 1973 are being adhered to.
Inspectors are obliged to investigate every relevant complaint and they even have the power to enter premises and prosecute agencies.
While the EAS tend to deal with complaints, and can apply to prohibit people from running an agency, there are other bodies that help maintain high industry standards.
There are a number of membership bodies for recruitment agencies but the two biggest are the Recruitment and Employment Confederation (REC) and the Associate of Professional Staffing Companies (APSCo).