The proposal, which must be endorsed by a majority of the 27 EU countries in consultation with the European Parliament, would also make employers liable for lost wages, taxes and social security costs and could disqualify them from public tender.

The measures would be a minimum requirement across the bloc. At the moment all member states, apart from Cyprus, have laws against blackmarket labour but only 19 impose criminal penalties.

The application of such laws also varies widely from those where little action is taken, like Britain, to the Netherlands where harsh penalties are imposed.

The Commission's proposal aims to reduce a "pull factor" for illegal immigration "targeting the employment of third-country nationals who are illegally staying in the EU."

The measures are aimed at employers and not workers.

As a preventive step, they would oblige employers recruiting someone from outside the EU to check their residence permit or other papers and notify their national authorities that they are hiring the person.

Those who fail to do so could be fined, including the cost of sending an illegal immigrant home, forced to pay outstanding wages, taxes and social costs and lose public subsidies or the right to tender for up to five years.

Between four to eight million people are estimated to be living illegally in the EU, with 500,000 illegal immigrants arriving every year.