There could be as many as 100,000 migrant workers employed on UK building sites, according to new research.
An estimated one million people work on building sites across the UK
A survey of 300 sites across the UK found that 10% of workers spoke English as a second language with many coming from central and eastern Europe.
It found that few have work permits but that many pay tax because of an anomaly in the system.
The survey was carried out by the Considerate Constructors Scheme, the industry's voluntary code of practice.
It is estimated there are one million people working on building sites across the UK.
Some of the migrants are working as plumbers and carpenters, the skilled jobs much in demand in the booming construction industry, according to the survey.
BBC correspondent Sanchia Berg said few of the migrant workers have work permits but are paying tax because of the Inland Revenue's policy of giving temporary Construction Industry Scheme Four - or CIS4 cards - to anyone who asks, regardless of nationality.
Only a permanent CIS4 card, which carries a permanent National Insurance number, is proof of the right to work, but many sub-contractors are confused and treat all CIS cards equally, she said.
Nearly 40,000 temporary CIS4 cards were issued last year.
Gerry Lean, director of industrial relations at the Construction Confederation - which represents Britain's biggest building firms - says the problem is quite widespread.
He told BBC Radio Four's Today programme: "Having spoken to a number of sub-contractors they, perhaps quite wrongly, aren't aware of the distinction."
The Home Office says it is aware of the problem and plans to tighten up the system soon to make it clear that a temporary CIS4 card is not enough for a sub-contractor to employ a worker.
Mr Lean says that even if immigration officers do find sub-contractors employing illegal workers the penalties can be light.
He said: "There was a recently reported case of someone employing 12 people illegally and there was a £100 fine - that's only £8.50 per person. Although there are theoretically punitive sanctions they're not currently being imposed."
Sir Andrew Green, of Migration Watch UK, called for the introduction of identity cards to stop illegal workers being employed.
He told the Today programme: "The system simply doesn't knit together. The government don't know who they've got or where from.
"We will never get a complete handle on this until we introduce id cards and we know who we've got in this country and why they are here."
The release of the survey results comes as the home secretary prepares to unveil plans to deal with any increase in migrants to the UK when 10 new countries join the EU in May.
David Blunkett was expected to try to strike a balance between accommodating workers who fill staffing shortfalls in the UK labour market, and preventing "benefit tourism".