'First we give them a free haircut, then we buy them a suit and tie and a manicure. Once you changeself-esteem, you change everything.'

Tim Watts has a problem; the more shares he gives away to his staff in Pertemps, his recruitment agency, the richer he gets. "De-leveraging your wealth is not an easy task," he says, with the biggest of laughs. "If I give away £5m of shares, my stake ends up being £15m. The more of the company I give away, the richer I become because the staff are more motivated, and so the business grows stronger."

It's a nice problem to have but not for the Birmingham entrepreneur, whose personal fortune is worth about £35m, because he wants to give more. He's already handed away about a quarter of Pertemps to his fellow workers who, together with their share options, own about 40% of the recruiter. With sister company, the Network Group, it's one of the UK's biggest independent recruitment agencies with 1040 staff and 200 branches in 70 towns.

Now the 63-year-old wants to gift the rest of the business to them – well, most of it – before he retires: " The tax they will have to pay is penal. It would bankrupt some. How ridiculous is that," he says. But there's a solution: "If the government wants to encourage more co-owned businesses like John Lewis as Nick Clegg said recently, there must be better tax incentives in place." It's a philosophy he wants to spread and why he helped found the Centre for Tomorrow's Company, the "think-and-do"-tank that calls for closer relations between workers and all stakeholders.

We meet for lunch at Meriden Hall, the lovely 19th-century house which serves as the HQ for the Watts empire, just on the outskirts of Birmingham, and known to be the geographic centre of the UK, or, as Mr Watts insists, the centre of the universe.

The car park is crowded with cars ranging from Bentleys to Rolls-Royces to Range Rovers to Jaguars with number plates like Job 1 and Employ 1. He has one of the finest private collections of Jaguars outside Jaguar. The cars are for the staff – part of the job reward. But there's a profit motive too. If the agency's workers can't get to a job, there's always someone to drive them, and in style.

Today Mr Watts is dressed in flamboyant style. There's his creamy-beige suit with watch-chain in his breast pocket, buff suede lace-ups and a gin and tonic close to hand. Spend 10 seconds in Mr Watts' company and you soon see why he's a legend: he's physically big, a former rugby winger and fanatical squash player, and along with his famous largesse – from lending his Rolls-Royce for staff to get married in to raising millions for charities, like Princess Anne's Spinal Injuries Association – he is wonderfully opinionated on just about everything.

How about unemployment? "Easy, I'll solve it in ten seconds," he says, launching into a raft of measures, from the pragmatic to the extreme. "Employment identity cards, which would help sort out people on the dole who also work, tighter control of those who apply for benefits and a proper crackdown on the black and purple markets, now growing fast and about 10% of the economy. How about infra-red cameras to track down illegal immigrants?"

Banks are in the line of fire too: "Their failure to publish balance sheets is a disgrace and a European cover-up." The ECB's quantitative easing programme and lucrative 5% carry trade "contravenes democracy". And the politicians? "They've been captured by the financial sector and have created their own mandate to run riot and roughshod over democracy." That's why he predicts there will be more governments toppled and serious social unrest, here and in Europe, with year-long strikes, that sort of thing.

Bonuses are spared. "Every Rolls-Royce that is sold to someone with a bonus means £200,000 goes to the government in tax. We should be pleased."

Unemployment is his bugbear. Work is a world he knows intimately. Over the past decade Pertemps, working with government agencies, has helped more than 100,000 people, from drug addicts to ex-prisoners, find work again with its training programmes: "First we give them a free haircut – because we have hairdressers on our books – then we buy them a suit and tie. Then there's a visit to the chiropodist and manicurist." (Pertemps has hundreds of chiropodists and manicurists on its books.) "It doesn't take long to improve esteem. It's all about attitude. Once you change that, you change everything," he says.

Helping the one million 16-25-year-olds, the Neets, into work would be his top priority. Instead of the state paying benefits, Mr Watts suggests part of the money should go to employers, like him, to take more of them on as apprentices: "Our schools are failing them. We are one of the few countries in the world where you are guaranteed 11 years of state-paid education, so it's disgusting to know that 50% of each year's cohort of students cannot meet the minimum passes in English and Maths."

This will be his fourth recession. It's a cruel irony but tough times are good for his business as companies shed full-time staff and then gear up again with temporary workers. This year Pertemps will find temporary jobs for around 250,000 workers, and place up to 12,000 people in permanent work. Jobs range from office managers to truck drivers.

Last year was a record. Turnover for Pertemps, the Network Group and his 40 or so other companies, was £420m and profit before tax £10.5m. This year is looking good too. So good that eight new acquisitions are being contemplated with the aim of gearing up for a float.

His mother, Constance, then in her forties, started the agency in 1961 with a £500 loan from her husband's employer. Mr Watts joined her as a temporary worker when he was 19. Many on the board, like the managing director Carmen Watson, have been with the company for nearly 40 years; both his daughters, Fay and Amy, work with him and it's no exaggeration to say Meriden Hall feels like one big happy family.

Isn't he worried that by getting bigger, by going for an IPO, Pertemps will lose some of that magic?

"Yes, some of the family spirit will go but the discipline will not. It's probably the best way that the staff can realise their wealth. But the fun won't go. So long as there's breath left in my body, work will be fun."

Taking the first step

Carmen Watson began work at Pertemps as an apprentice secretary from school 36 years ago. By the age of 24, she was running one of the branches with sales of £5m, and today she's managing director of a national business with sales of around £280m.

Although a wealthy woman, she still calls herself "an apprentice". So it's no surprise she's an enthusiast for apprenticeships and has just run a pilot course through the Midlands branches of Pertemps for 45 candidates. They were sourced through the Welfare-to-Work programme and 11 were chosen for the two-month training that included courses in IT and business administration.

Ms Watson said the scheme was such a success, with the young apprentices saying it had "changed their lives", that she wants to roll out the programme in Pertemps' 200 branches. The scheme didn't have government backing but Ms Watson hopes it will.