Fatwa ID: 08774

Answered by Alimah Saleha Bukhari Islam

Question:

Is it permissible in Islam to run an employment agency or work for such agencies?

Process of working: A company makes an agreement with supplier for workers included food and transport. In return, company pays supplier $20 per hour per worker and supplier pays $15 per hour per worker.
The worker doesn’t know the actual rate that company pays them. So supplier will continue to receive $5 per hour per worker as long as the workers doing work.

Is this a form of Riba?

In the name of Allah, the Most Gracious, the Most Merciful

Answer:

This arrangement is not considered riba (usury) in Islam. Riba refers specifically to unjust excess in a loan or in certain financial transactions involving deferred payments. This case does not involve a loan, but rather a service-based transaction and a wage agreement.

A recruitment agency may operate within the framework of a hire (ijarah) contract. In this model, the employer pays the agency a fee in return for its services such as sourcing, providing, and managing suitable employees. In exchange for these services, the agency charges a fee which is reflected in the difference between what the company pays and what the worker receives. The agency, thus, establishes a separate contractual agreement with the worker, compensating them for the work performed. This contractual agreement is typically set at a rate lower than what the employer pays the agency.

If the worker is misled into thinking they are receiving the full amount or are unaware of the agency’s role, then this could fall under uncertainty (gharar) or deception (khida’), which are prohibited in transactions. Transparency is encouraged, even if not legally required. While the agency is not obliged to disclose the full billing rate, Islam encourages fairness and openness, especially when it impacts trust and well-being.

It is permissible to operate or work for such an agency under the following conditions: the wage agreed upon with the worker must be known, fair, and clearly communicated and there must be no deception or exploitation. The profit made by the agency must be in exchange for genuine services such as recruitment, transport, meals, admin, or visa processing etc. Islam permits profit through services rendered, not through unjust enrichment.

The framework of a hire (ijarah) contract aligns with the Quranic principle of conducting lawful and consensual business transactions, as stated in the verse:

“O you who believe! Do not devour one another’s wealth unjustly, but only in lawful business by mutual consent.”

[Surah al-Nisa 4:29] [1]

The arrangement discussed above is permissible in Islam and does not constitute riba, provided that the worker’s wage is agreed upon, fairly earned, and transparently communicated. The agency’s profit is permitted if it corresponds to real services offered and no deception is involved.

References:

[1]  يَـٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوا۟ لَا تَأْكُلُوٓا۟ أَمْوَٰلَكُم بَيْنَكُم بِٱلْبَـٰطِلِ إِلَّآ أَن تَكُونَ تِجَـٰرَةً عَن تَرَاضٍۢ مِّنكُمْ ۚ

Only Allah (عز و جل) knows best.

Written by Alimah Saleha Bukhari Islam

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham