How staffing and recruitment agencies invoice clients

Staffing agencies invoice clients for temporary workers weekly or fortnightly, multiplying approved timesheet hours by an agreed bill rate. Recruitment agencies invoice a one-off placement fee, usually a percentage of the candidate's salary, when the candidate accepts or starts. Retained searches are billed in instalments as the search moves.

Which invoice does each kind of agency send?

Each kind of agency bills for something different, so the invoice, its timing and the evidence behind it all change.

How does a temp staffing invoice work?

A temp staffing invoice charges approved hours at the agreed bill rate, line by line, for a stated week. Here's an invented example of a warehouse client's weekly invoice, with 20% VAT.

What makes these invoices easy to pay is the reference trail: the client's purchase order or cost centre, the week ending date, and an approved timesheet behind every line. If the client approved the hours, there's little left to argue about. If they didn't, the invoice will come back. A team timesheet template gives you a layout that feeds a line like this.

Large clients may run the process themselves through a vendor management system, sometimes with self-billing, where the client draws up the invoice in your name. Article 224 of the VAT Directive allows that with prior agreement and a procedure for accepting each invoice, and the invoice must carry the words "Self-billing" (Article 226(10a)).

What is the difference between markup and margin?

Markup measures the bill rate against the worker's pay, while margin measures what's left against the bill rate, and agencies quoting one when they mean the other is a common source of bad pricing.

Using invented figures for the same €24 bill rate:

A 60% markup sounds generous. It leaves €6 an hour to pay for your office, your consultants and any client who pays late. Temporary staffing also has a cash gap that a recruitment fee doesn't: on 30-day terms, you can pay four or five weekly payrolls before the first client payment arrives. Set your payment terms with that in mind.

How does a placement fee invoice work?

A placement fee invoice charges once for a successful hire, usually as a percentage of the candidate's agreed salary. Fee levels are a commercial matter for your terms of business, so the figures below are invented.

A 20% fee on a €48,000 salary is €9,600, plus 20% VAT of €1,920, for a total of €11,520. Define "salary" in your terms before you need to: whether it includes bonus, commission or a car allowance can change the fee by more than the percentage you negotiated.

Placement fee: Operations Manager, candidate J. Example, start date 1 February 2027. 20% of agreed first-year base salary of €48,000, per terms of business dated 5 October 2026. Rebate terms: clause 7.

Rebates. Many terms refund part of the fee if the hire leaves early. Here's an invented sliding scale on that €9,600 fee.

A rebate reduces an invoice you've already issued, so it normally goes on a credit note rather than an edit to the original.

Retained search. A retained fee is split across the search. As an invented example, 30% of a €75,000 salary is €22,500, billed as three instalments of €7,500: on engagement, on shortlist and on placement. The mechanics are those of progress billing, with a search in place of a project.

What VAT applies to an agency's invoice?

VAT on an agency's invoice depends on whether the agency supplies the worker or only introduces them. HMRC draws that line clearly in VAT Notice 700/34:

• Supplying staff as principal: VAT is due on the full charge, including staff costs recovered from the client (paragraph 2.3). In the invoice above that's VAT on the whole €3,048, not on the agency's margin.
• Acting as agent, introducing a worker who contracts directly with the client: this is an introductory service, and VAT is due on the agency's charges (paragraph 5.1.2).

The cost of VAT on the whole charge lands on clients who can't reclaim it, so expect that conversation with them. Other countries reach their own answers, so check yours. For clients abroad, see the guide to invoicing EU clients.

Which agency-worker rules affect the invoice?

Agency-worker rules affect the invoice mainly through the bill rate and the transfer fee. The rules vary by country and change, so treat these as pointers to check with an adviser.

• Equal treatment: in the EU, Directive 2008/104/EC, Article 5 says a temp's basic working and employment conditions must be at least those they would have had if recruited directly, and national laws implement this differently. In the UK, the equivalent right starts after 12 continuous calendar weeks in the same role with the same hirer. If pay goes up at that point, your terms need to let the bill rate follow.
• Moving to permanent: EU law voids clauses that stop a client hiring a temp after an assignment, while allowing the agency reasonable recompense for its services (Article 6(2)). In the UK, a transfer fee can be charged only under set conditions, and the fee must be in your contract with the hirer.
• Charging workers: Article 6(3) of the same Directive bars agencies from charging workers fees for arranging their recruitment by the client.
• Licensing: some countries and sectors require an agency to hold a licence. Check before you bill a client in a new one.

The UK government has been consulting on changes to this framework, so check the current position there.

Invoicing staffing and recruitment clients in ERPFlow

ERPFlow doesn't have a timer or timesheets today. Time tracking, including converting tracked time into invoices, is coming soon. It has no payroll, shift scheduling or candidate tracking, so it handles the invoice and not the placement.

• Rates: add each role as a service with the unit hr and its bill rate. Rates that differ between clients are typed over on the line.
• Weekly invoices: type approved hours as the quantity on an invoice line, and put the week and the worker in the description. Duplicate copies last week's invoice into a new draft, which saves retyping the lines. A recurring invoice doesn't fit here, because its lines are identical each run.
• References: the Order number field holds the client's purchase order, and prints on the PDF.
• Timesheets as evidence: attach the approved timesheet to the invoice. Attachments stay on your record and aren't emailed with the invoice, so send the timesheet separately if the client wants it.
• Placement fees: one line on an invoice, with the wording above in the description.
• Rebates: ERPFlow has no credit note document. Mark as void and Duplicate handle a full cancellation and reissue, but a partial rebate needs a credit note from your accounting system.

Each client's customer record shows net revenue and what's outstanding. ERPFlow won't show margin per worker, per client or per placement.