The police are often "not interested, too busy or don't know what to do" when illegal immigrants are reported, says the largest UK traffic warden provider.
National Car Parks said the current system was inadequate
National Car Parks said it reported the illegal migrants who attempted to get jobs with it, but most "walked away".
"Limited resources" for immigration officers also seemed to contribute to a lack of action, the firm told MPs.
The Home Office said it was working with employers to make sure they were aware of the law.
MPs heard that ID checks were not robust enough nor enforced well and there are lots of "forged documents".
Many employers recognised the need for checks but become disenchanted due to "a general lack of joined-up thinking from enforcement agencies", the company said in a submission to MPs reviewing the proposed Borders Bill.
The firm, the biggest provider of parking attendants for local councils, employs around 3,000 foreign nationals.
It said the bill - which makes identity cards mandatory for foreign nationals - ought to require all employees to have their biometric identity documents checked.
Guidelines requiring employers to carry out a "reasonable" check were insufficient, it said, as potential employees would have to consent to it.
"Therefore the checking system does little to address the very real issue of the underclass of workers in the population, those with forged documents who present to less than scrupulous employers."
NCP executive Gordon McLardy told the MPs: "If you put biometric [checks] in, it should be mandatory, or we would be failing in our duties."
He added that in 2005 the company had identified 100 non-EU national applying for jobs at NCP who would have been illegal workers.
"Clearly we've a system which lends itself to illegal workers, the checks aren't robust enough, we don't enforce it well and clearly there's a market for false documentation."
He added that the number of forged ID documents meant it was sometimes easier not to employ a non-EU national, just in case they turned out to be an illegal worker.
He also called for better information sharing between employers and different enforcement agencies, as well greater awareness among police of immigration issues.
"There isn't a central database which collects this information - what you find is that illegal immigrants will go to a certain area of a city where they'll congregate because they can get forged documentation," he said.
Gareth Crossman, policy director of human rights group Liberty, told the committee that biometric ID cards would not have a "significant effect" on the numbers of illegal workers in the UK.
"If the problem is in illegal working, and there are employers that do not care about the status of their employees, biometric ID will make no difference," he said.
"It might make a difference for scrupulous employers who are being hoodwinked. But I don't think that's a significant problem," he added.
The government says the Borders Bill's introduction of ID cards for non-EU nationals will help to tackle illegal immigration and illegal working, and cut down on forgeries.
The Home Office said in a statement that the Immigration and Nationality Directorate carried out 3,000 enforcement operations in 2005.
Shadow home secretary David Davis said Mr McLardy's comments had reinforced the Conservatives' argument for a "dedicated UK border police force" to secure borders and find and remove illegal immigrants and workers.