Key takeaways:
- A tutoring business employs or directly delivers tutoring; an agency connects clients with self-employed tutors.
- The distinction affects your legal obligations, how you handle payments, and how you classify and pay your tutors.
- This guide is intended as general guidance; we recommend speaking to a legal professional for more information.
If you’re looking to start your own tutoring company, it’s important to understand the technical and legal differences between a tutoring business and an agency.
The terms are occasionally used interchangeably, but have important differences that you need to be aware of in order to stay compliant with laws and regulations.
Here's a clear breakdown of both models, what they mean in the UK and US, and the practical steps you can take to stay compliant.
What is a tutoring agency?
First up, a tutoring agency is a company that connects students and families with independent, self-employed tutors. It does not employ the tutors directly, but acts as an intermediary between customers and tutors.
The agency then earns a commission or fee for making the introduction, but the tutor and client work together on their own. The benefit for tutors using an agency is that they save time building a client base. For students, agencies provide trustworthy and vetted tutors faster.
What is a tutoring business?
On the other hand, a tutoring business typically delivers tutoring directly to students. The tutors are either employed by the company itself or own the business. In this instance, the business controls how lessons are delivered, the rates charged, and takes responsibility for the quality delivered.
Employing tutors means you are responsible for their pay, tax, and employment rights. The benefit of running a tutoring business is the high degree of control over how the tutoring is delivered, which is a key factor for many when deciding what type of company they want to run.
Looking to start a tutoring business? Take a look at our step-by-step advice to set yourself up for success.
What this means in the UK
In the UK, the legal landscape for tutoring agencies shifted significantly following a 2020 High Court ruling, ‘Simply Learning Tutor Agency Ltd v Secretary of State for BEIS’, which confirmed that tutoring agencies introducing self-employed tutors to clients fall under the Employment Agencies Act 1973. This was a landmark moment for the sector.
What does that mean practically? If your business introduces tutors to clients and handles payments on their behalf, you are likely operating as an employment agency under UK law, regardless of whether tutors are employed or self-employed.
We recommend familiarizing yourself with legislation and making sure you are following the correct steps to stay compliant.
Some key rules to be aware of:
- You cannot charge tutors for finding them work.
- Payment handling matters: Agencies cannot control or withhold payments intended for tutors. Many agencies now operate split invoicing (where the client pays the tutor's fee directly; the agency invoices separately for its commission) to remain compliant.
- IR35 rules may apply if tutors working through your business look and function like employees. HMRC takes a close look at this. Getting contracts right from the start is essential.
- DBS checks are expected when working with children, regardless of model, but who is responsible for obtaining them differs between an employer and an agency.
TutorCruncher’s software is designed to help tutoring businesses and agencies stay compliant with UK laws and regulations, particularly when it comes to split payments. Get in touch with our team to find out more.
What this means in the US
In the US, the central compliance question is worker classification, and it's an area of ongoing legal change. The IRS uses a multi-factor test focusing on behavioral control, financial control, and the nature of the working relationship to determine whether a tutor is genuinely an independent contractor or a de facto employee.
If your business controls how tutors do their work, they may be classified as employees, whatever your contracts say.
A few things to keep in mind:
- State rules vary significantly: California's ABC test (introduced under AB5) applies stricter criteria for classifying contractors, and similar legislation exists in other states. Always check the rules in your state.
- 1099 vs W-2: Self-employed tutors are paid as 1099 contractors; employed tutors require W-2 payroll. Misclassifying a tutor as a contractor when they're functioning as an employee can result in significant back-tax liability.
- Background checks: There's no federal mandate, but most reputable tutoring businesses carry them out when working with minors, and some states require them.
- Licensing: Requirements vary by state and sometimes by city, so check what applies to your location before you start operating.
As ever, this is intended as general guidance, and we recommend conducting your own research or talking to a legal professional in order to stay compliant.
Practical steps to stay compliant
Whichever model is right for your company, it’s important to follow these steps from the beginning:
Get your contracts right: Make sure the working arrangement described in your contracts reflects reality. A tutor labelled a contractor who works exclusively for you and follows your lesson plans in detail is likely to be viewed as an employee by a regulator or court.
Handle payments correctly: In the UK especially, how you process tutor payments is really important. Split invoicing is now widely considered best practice for agencies and made simple in TutorCruncher’s software.
Carry out appropriate checks: Enhanced DBS (UK) or state-equivalent background checks (US) for anyone working with children are essential.
Understand your tax obligations early: Whether you're running payroll for employees or issuing 1099s to contractors (US) or managing self-employed arrangements (UK), get professional advice before you scale.
Review your insurance: Insurance requirements differ between business and agency models.
Stay current: Worker classification law is ever-evolving. What was compliant a few years ago may not be today, so make sure you stay up to date and seek professional advice when needed.
Which model is right for you?
Deciding whether to run a tutoring business or a tutoring agency is up to you, your goals, and ambitions. Think carefully about how much control you want to have over your business and what your future plans are before deciding.
Many successful tutoring companies start as a hands-on tutoring business and grow into an agency. While others may start as an agency before bringing tutors in-house to maintain quality and control. There are pros and cons of both, and always the option to transition to a different model. What’s important is that you’re clear about the requirements of both and get the right advice early on.
TutorCruncher supports both tutoring businesses and agencies, from automated billing and payroll to scheduling and analytics. Start your free two-week trial to see how we can help you.
