Recruitment agencies look like a straightforward limited company client. Variable income, standard P&L, relatively clean accounts. That's true for permanent placement agencies. The moment an agency places temporary workers, the complexity multiplies and most practices don't reprice when it does.
What makes temp agency bookkeeping different
- Payroll is weekly, not monthly. Temp workers are paid at the end of every week, sometimes more frequently. That's 52 payroll runs a year, not 12. Each one requires timesheet processing, holiday pay calculation, and the production of payslips, true cost reports, and client billing breakdowns.
- Agency Workers Regulations compliance. After 12 weeks in the same role, temporary workers are entitled to the same basic pay and conditions as permanent staff doing the same work. Tracking the 12-week qualifying period falls on the agency. Missing it exposes the client to retrospective claims.
- IR35 applies to contractor placements. If the agency places contractors rather than employees, worker classification must be correct. Getting it wrong creates retrospective PAYE and NIC liability and the firm that prepared the accounts has its advice in the file.
- High invoice volumes with complex matching. The agency invoices the client for the worker's time plus margin. It pays the worker for the same time minus costs. The margin in between needs to be tracked accurately across multiple placements simultaneously. At volume, this is a significant reconciliation task.
- Cash flow timing creates a bookkeeping problem. The agency typically pays workers on Friday before the client invoice has been paid. The float needs to be tracked carefully. It's not a stable figure and it affects the bank reconciliation every week.
- Cross-border placements add VAT complexity if the agency operates internationally. Rules on place of supply for staffing services are specific and frequently miscoded.
Where the pricing goes wrong
Most practices price recruitment agency clients based on turnover. But it's the transaction volume and the payroll frequency that drives the actual hours. A £2m turnover temp agency with 50 workers on placement at any given time is not the same workload as a £2m turnover professional services firm. The accounts might look similar. The bookkeeping underneath does not.
What can be systematised
Weekly payroll runs, timesheet reconciliation, invoice processing, AWR tracking, and bank reconciliation are all trainable, repeatable tasks. They require a documented process and a team that runs it weekly without it landing on your associates.
The IR35 assessments, the AWR advice, the client relationship: that stays with you. The weekly operational layer runs in the background.