Thousands of UK recruitment firms could be contravening the new Employment Agencies Act (EAA) regulations by missing out on just one piece of paperwork.

Under the new regulations, which came into force last April, any agency that finds permanent positions for candidates needs to have in place a contract with each new candidate, according to Adrian Marlowe, managing director of recruitment law specialists Lawspeed. Yet many agencies only draw up contracts with clients and long-term candidates, rather than prospective new ones.

"As soon as you start processing a candidate's CV, it becomes unarguable that you're not providing that candidate with a service, so you need a contract," explained Marlowe at last week's meeting of the Recruitment Society.

Marlowe warned that agencies that did not comply could be subject to an inspection by the Department of Trade and Industry if a complaint were made against them. The DTI can impose fines of up to £5,000 for agencies that contravene regulations.

Drawing up new contracts for permanent candidates could involve further administration costs to recruiters.

Graham Palfery-Smith, regional managing director for finance recruiter Robert Walters, described the DTI's expectations that every agency would comply as "unrealistic".