Do schools have to pay agency buy-out fees for supply teachers?

Schools are complaining that staffing agencies can levy thousands of pounds whenever a supply teacher is offered a permanent contract, even if the full recruitment process is followed. Ramona Derbyshire looks at what the law says

Like any commercial entity, a school is subject to public procurement rules and at liberty to contract with other parties on the best terms it can negotiate.

Where those terms are concluded, and the service performed, the school is bound by those terms, regardless of whether the deal turns out to be less than favourable for the school, or indeed where the leadership team failed to read or fully understand the terms.

When considering staffing agencies it is important to be careful for two reasons.

Firstly, there is a distinction in law between an employment business, where the worker is employed by the employment business and hired out to the customer, and an employment agency, which places workers in temporary or permanent roles. Different terms are likely to apply to the type of service being provided, so it is important to understand which service you are taking up and what terms apply.

Belgian footballer Jean-Marc Bosman won a landmark victory in 1995 on the importance of free movement of labour

Secondly, and whichever service you are using, both often come with hefty terms that can be long and complex. Ordinarily you will find standard terms as to what happens when a worker introduced by the agency, which can mean simply dropping a CV into your inbox, is taken on via a permanent contract, usually invoking a transfer fee.

Transfer fees may be charged by an employment business to a hirer and are typically payable when an agency worker it introduces is subsequently engaged directly, either on a permanent or a temporary basis. The justification is that the transfer fee compensates for the time and energy invested in engaging, screening and introducing the worker and for loss of revenue stream elsewhere.

There is a regulatory framework. The Conduct of Employment Agencies and Employment Businesses Regulations 2003 assert that the employment business must not charge the transfer fee unreasonably.

So, for example, where a school has directly hired a temporary worker, the employment business can charge a transfer fee provided the hirer is given the option to have the worker supplied for a specified extended period of hire, at the end of which the worker will transfer without charge. It is unlawful for an employment business to seek to enforce any contractual term against the hirer that is unenforceable under the regulations.

On the subject of transfer fees, Belgian footballer Jean-Marc Bosman won a landmark victory in 1995 on the importance of free movement of labour, forcing a ban on restrictions and allowing players in the EU to move to another club at the end of a contract without a transfer fee – in a situation known as the Bosman ruling. But before schools get too excited and cling to the laces of the football boots, the decision was caveated to apply only to transfers between clubs within EU associations.

To help avoid fees, a school should consider adopting a policy on how it goes about recruitment.

This could include nominating a point of contact for all recruitment enquiries, operating a preferred supplier list (PFL) with applicable terms and conditions, and making agents sign up to the PFL on your own terms. Where an agent provides unsolicited candidates, schools could make a written response stating their policy, that speculative approaches will not be considered and that candidates’ CVs will not be considered outside of that policy process.

If you are a larger school or multi-academy trust making repeated use of agencies, make the most of your buying power. Scrutinise the agents’ terms and renegotiate those that you aren’t happy with. Have your own bespoke terms drawn up and seek to engage the agency on your terms. The agency is likely to want to keep your business and at least seek a compromise.

Ramona Derbyshire is a partner at Thrings Solicitors

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  1. We are a supply teacher business employing up to 30 teachers at any one time.
    We are confused about “finders fees” and want to know if we can charge a fee where a teacher has been on assignment for 14 weeks already and has been offered a permanent role. The regulations are very confusing and seem to apply to assignments that have concluded. Can you help?