When does having a team make you an employment agency?
You think you’ve got a freelance team.
The law might disagree.
If you supply people to work for your clients — even if they are self-employed — you can fall within employment agency rules. And most freelancers don’t realise where that line is until they’ve already crossed it.
Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, an “employment business” is not about what you call your team. It’s about what actually happens in practice.
If your setup brings you within scope, you take on a completely different level of responsibility — and restriction.
Quick reality check
You may be closer to this than you think if:
-
Your client directs your freelancer’s day-to-day work
-
Your freelancer reports directly to the client
-
You are supplying people, rather than delivering a defined outcome
If that sounds familiar, keep reading.
Employment agency status will make it your job to sort out IR35
If you are an agency, then it is your job to handle certain elements of IR35 status assessments and administration depending on the size and structure of your clients business. The fact your business may be below the threshold does not get you out of this.
What happens if the regulations apply?
This is where things get uncomfortable.
If you are operating as an employment business, you don’t just “run a team” — you take on obligations that change how your business works.
You may:
-
Need to provide detailed terms equivalent to employee-style documentation
-
Lose the ability to restrict your team from working with other clients
-
Be unable to require your team to buy services from you
-
Have to pay your freelancer even if your client doesn’t pay you
That last one catches people out.
Many freelance business owners rely on “we’ll pay you when we get paid” clauses. If you fall within the regulations, that approach can fail.
Employment agency status brings IR35 into your world
If you are treated as an agency, you may also find yourself responsible for elements of IR35 compliance.
That means:
-
assessing status
-
handling documentation
-
dealing with the admin your clients would otherwise carry
In other words, the risk and responsibility move towards you.
What actually makes you an employment agency?
f you are supplying people to work under the control of your client, you are in the danger zone.
It doesn’t matter that:
-
your team are freelancers
-
they invoice you
-
you call them associates
Those labels don’t override reality.
Where things are usually safer:
-
You take a brief from the client
-
You retain control of how the work is delivered
-
Your team work to you, not to the client
-
You deliver an outcome, not a person
Where things get risky:
-
The client directs the work
-
The freelancer becomes part of the client’s team
-
You are effectively introducing and supplying labour
That is when you start to look like an employment business.
Agency worker rights (and why this matters more now)
If you fall within scope, the Agency Workers Regulations 2010 can apply.
That brings rights such as:
-
paid holiday
-
minimum wage protections
-
and, after 12 weeks, parity with comparable employees
The direction of travel in UK law is towards more protection for workers in flexible arrangements.
So this isn’t a shrinking risk — it’s a growing one.
Can you avoid being regulated as an employment agency?
Yes — but only if your contracts and your day-to-day reality match.
You need to structure your business so that:
-
Your freelancer is not controlled by your client
-
You are delivering outcomes, not supplying people
-
Your freelancer operates as an independent business
-
You remain the one responsible for how the work is done
In practice, that means:
-
Clear boundaries in your contracts
-
Clear boundaries in how the work is managed
-
Consistency between what you say and what you actually do
If those drift apart, the risk builds quickly.
The bit most people get wrong
It’s not the contract.
It’s what happens after the contract is signed.
Clients naturally try to:
-
manage your freelancer directly
-
treat them like part of the team
If you allow that, you are moving towards an employment-type setup — whether you intended to or not.
Not sure where you sit?
Most people aren’t.
This is one of those areas where small differences in how you work can completely change your position.
If you’re building a team — or already have one — it’s worth getting clear on:
-
whether you are delivering a service
-
or supplying people
Because the legal and financial consequences are very different.
Contracts for the way you work today
If you want to build a team around you without stepping into employment agency territory, you need contracts that reflect how you actually work — not how you hope it works.
You can explore our team hiring options here:
Agency status is one of many issues from data privacy and confidentiality to the use of AI that your contracts and practises need to take care of.
