How to get paid by a closed (or closing) recruitment agency

If you’re a contractor working via a recruitment agency, you can be in a very precarious position at times -- and it seems those ‘times’ are right about now, given a new spate of recruitment agency closures, writes Adam Home, managing director of debt collection specialists Safe Collections.

Why is the position of an agency contractor precarious?

Well, it’s partly because, although the majority of agencies are likely to be responsible and respectable businesses, a bit like our field of debt collection, recruitment can occasionally attract disreputable characters.

So what steps can contractors take to recover their money from an agency that is in administration or liquidation, and maybe not being very nice about settling your invoice despite its ‘due date’ being well past?!

How to get paid by a recruitment agency in administration or liquidation

If your recruitment agency has formally entered administration or liquidation, there is no legal or other action you can take to recover any outstanding payments.

In either administration or liquidation, the agency is protected from any action by creditors from the time they appoint the administrator or liquidator.

With closed recruitment agencies, contractors are unsecured creditors

And as a contractor with an unpaid invoice, you’ll become an “unsecured creditor” of the agency in administration or liquidation.

R3, the UK's insolvency trade association, has guides on all the various types of corporate insolvency procedures, including what they mean for creditors, here.

But in short, if the agency has gone as far as to appoint an administrator or liquidator, then chances are it is already too late to do anything to secure any payment owed.

How to get paid by a recruitment agency not yet in formal insolvency

If your agency (or another intermediary) isn’t yet in formal insolvency but you suspect that formal insolvency may be imminent, possibly due to repeatedly late or missed payments to you or other contractors working via the same agency, then you need to act quickly.

Agency contractors should remember that it is often the case that those who shout loudest get paid first when cash is tight.

Contractors should therefore be prepared to escalate any issue of non-payment, as part of generally making as much noise as reasonable if an agency they are reliant on is showing signs of insolvency.

Should unpaid agency contractors contact the agency directly?

Your first port of call as a contractor if you suspect the recruitment agency is heading for insolvency should be to the agency itself.

Follow an expedited credit control process, and be prepared to shorten the timeline if one or more of your invoices are already overdue for payment.

Be firm but professional.

When should contractors terminate?

Next, if your contract allows for termination, you may wish to consider this option of termination if:

• You cannot secure swift payment, or if
• You suspect that all is not right with the business more generally.

Keep in mind, it is better to be unpaid for two months rather than four.

When should recruitment agency contractors with overdue invoices approach the end-client?

If you cannot obtain a satisfactory answer to your queries or are unable to receive clarity on overdue payments from the agency, we recommend that

contractors reach out to the end-client instead.

In our experience, many contractors will find that the client is keen to retain their services and skills, so the client will often ‘go into bat’ for the contractor -- against the agency.

As a contractor, you and the end-client may be able to agree on direct payment of future invoices with the agency, reducing the risk of further non-payment.

Negotiating an exit from your recruitment agency contract

Our debt collection team has also seen cases where the end-client has helped the contractor negotiate an exit from the contract, and subsequently been engaged directly by the client.

If you’re a contractor in such a fortunate position, enquire about a mutually agreeable payment plan to clear any arrears on the previously missed payments.

However, don’t expect all clients to fight the contractor’s corner.

Indeed, over the years, we’ve seen more than one end-client simply shrug their shoulders when informed of the contractor’s payment issues due to a recruitment agency on the brink.

Escalate non-payment of an invoice be like…

If you’re an unpaid agency contractor whose client is shrugging their shoulders, we recommend you look at your escalatory options outside of the contract.

In practical terms, escalation means taking further steps of your own accord to try to collect any funds owed to you as soon as possible.

We’ve previously advised (at some length) on how contractors can get paid if all else fails, but, in short, you need to look at how best to escalate your claim -- not just as quickly as possible, but also as effectively as possible.

Three options to chase down unpaid contractor invoices

Option 1: Hire a contractor debt collection agency

A debt collection agency like us is one option.

As we only charge on successful recovery of funds, the financial risk to the contractor is nominal, because if the recruitment agency does ‘go pop’ then there are no fees to pay.

But as with any service supplier, you need to conduct your own ‘due diligence’ to make sure that the agency you settle on is bonafide. If the debt collection firm you hire isn’t bonafide, you could simply be swapping one headache for another!

Option 2: Issue County Court proceedings against the recruitment agency

The second option, as an unpaid agency contractor with an unhelpful client, is to look at the issuing of County Court proceedings, either in-house as a litigant in-person, or with a solicitor.

The court costs are just 5% of what you are owed, and you may get an enforceable judgment in 28 days in the event that the claim is undisputed.

But in court, if a defence is filed by your errant payer, you could be waiting months (or longer) for a hearing, because the UK civil court system is currently in a woeful state. There’s no current sign of any immediate improvement.

Option 3: Apply to wind up the recruitment agency (compulsory liquidation)

The third option, if you’re an out-of-pocket contractor with both an unhelpful client and an unhelpful agency, is the possibility of applying to have the agency “wound up” in the High Court. 

This third route for contractors to receive payment from a recruitment agency is known as ‘Compulsory Liquidation.’

But the costs and risks of applying to wind up the recruitment agency (i.e. compulsory liquidation) can be significant.

As a result, compulsory liquidation is not a route that we generally recommend pursuing as a contractor without competent legal support.

Disadvantages of litigation

Keep in mind, as much as it can rankle to be left in the financial lurch, litigation of any kind is never a risk-free option.

And if a recruitment agency you were contracting with does formally enter insolvency, any claims are ‘stayed’ and any court or legal fees incurred will be wasted.

So a cautious approach to costs (when you’re already without money for services rendered) is important.

Regretfully, when it comes to being a creditor of an insolvent company, there are no ‘good’ options. We advocate that contractors prepare themselves that any action they take may not be successful.

Beware agency director personal liability promises

Finally, a quick word of warning about something rather predatory in 2025-26.

If your contractor recruitment agency does go bust, there is a high chance you will be contacted by a company that promises it can recover the debt owed from the agency’s director(s) -- personally.

The company which contracts you may even claim that they have “evidence of malfeasance” by the director(s). Similarly, the company may claim to be “authorised to investigate under Section 214 of the Insolvency Act 1986.”

Contractors, please don’t feed the vultures…

As good as they might sound, all these claims are false.

Unfortunately, many vulture-like companies swoop on the carcasses of recruitment agencies to prey on contractors, hoping contractors will be unwary and desperate enough to pay advance fees to pursue your debt -- a debt that the company knows will never be paid.

Or if one day it might be paid to you, it won’t have anything to do with this vulture company!

So, hang up on ‘cold callers,’ whose claims don’t stack up with insolvency law

Therefore, at a time when the number of recruitment agencies shutting down is running well into three figures in just six months, we urge contractors to avoid any company that ‘cold calls’ them with promises. If it were as easy to collect a debt from a director of an insolvent company as the caller would have you believe, then insolvency itself wouldn’t be the issue that it is right now for hundreds of agencies and hundreds more contractors.