European businesses caught employing illegal immigrants face jail sentences under new proposals from the European Commission to control immigration
Justice Commissioner Franco Frattini also wants a five-fold increase in the number of spot checks on companies.
As much as 16% of Europe's business is done off the books, Mr Frattini says.
It is estimated that there are 3-8m illegal immigrants in the EU, a figure increasing by up to 500,000 every year because of easy access to illegal work.
New penalties are also proposed for individuals who hire workers, such as cleaners.
Employers would have to check that anyone they hired had a residence permit, and businesses would have to notify national authorities.
Fines for offenders would include the cost of repatriating the worker, as well as payment of any unpaid tax or social security.
Criminal penalties would be imposed on employers who knowingly hired victims of trafficking, who were caught hiring several illegal immigrants, or who were "particularly exploitative".
"The possibility of finding illegal work is the main driving force behind illegal immigration. The EU must act together," Mr Frattini said.
BBC Europe business correspondent Alex Ritson says there is little doubt why illegal workers are attractive for many companies - they earn a fraction of the regular wages and the penalties for companies caught breaking the rules are rarely severe.
But the proposals may face resistance from some member states, he says, as traditionally the EU does not interfere with matters of criminal law.
Mr Frattini said that the risk of getting caught employing illegal immigrants in Europe was "practically non-existent", because only one in 50 businesses was checked each year.
Under his proposal this would be increased to one in 10 per year.
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