ArticleRecruitment agenciesRecruitment industry

Why recruitment agencies might ask you to pre-pay

It is quite common for recruitment agencies to request that you pre-pay when you’re looking to hire temporary staff.

What does pre-paying mean?

Pre-paying means paying weekly in advance.

For example, if you hire a temporary labourer for 3 weeks starting on June 1st, the agency will require you to pay by June 1st the expected invoice for the first week. Then, a week later, on June 8th, they’ll expect you to pay the estimated invoice for the second week of work.

Please note that you would only pre-pay if you’ve found a suitable candidate at the right rate and once you’ve agreed the recruitment agency’s Terms of Business.

Why do recruitment agencies ask me to pre-pay?

Recruitment agencies bear a credit risk: they pay their candidates on a weekly basis, but get paid by the companies who hire them on a fortnightly or monthly basis. Therefore, they often have arrangements with banks who “factor” their debt, i.e., cover this financial risk for a fee.

As part of these banks arrangements, factoring companies require recruitment agencies to check that the companies they’re dealing with are solvent. Agencies perform credit checks on your company using companies such as CreditSafe or Experian.

Agencies will require pre-payment when they can’t check your credit score on Experian or CreditSafe, or when your credit score is low, for example if:

  • you’re a sole trader
  • you’re a limited company recently registered on Companies House and have not filed your first accounts yet
  • you’re a dormant company on Companies House
  • you have a low credit rating, generally defined by agencies as a credit score under 40 out of 100 or a credit limit lower than £10,000.

What if the candidate ends up working more or less hours than planned?

The agency will make adjustments at the end of each week – for example, if the candidate worked less hours than planned, or more.

What if I don’t want to pre-pay?

If you’re a sole trader, a company with no or a low credit rating, it will be very hard for you to find temporary staff via recruitment agencies if you don’t accept to pay in advance.

That’s why if you’re using TempaGoGo, we ask you if you’re ready to pre-pay to enhance your chances of finding temporary staff fast!

How do I know what my credit rating is?

As a business, you can often have access to your own company’s credit rating for free, for example from:

  • Creditsafeclick here for your free company report
  • Experianclick here for a free 30-day trial.

Any questions, please don’t hesitate to ask us!

Caroline, co-founder of TempaGoGo, an online aggregator of temporary recruitment agencies