The European Commission will establish a body to monitor the "posting" of employees from one EU state to work in another, following a review of the practice.
The Commission says in a report today that if necessary it plans to fine member states who do not confirm with European Union law on the practice.
It said while mobility was vital to addressing labour shortages in the EU, host countries must be able to use proportionate control measures to fight illegal employment and ensure the protection of workers", Employment, Social Affairs and Equal Opportunities Commissioner Vladimir Pidla said.
There are an estimated one million workers "posted" annually within the EU to another state, with up to 8,000 in Ireland. "Posted" workers do not benefit from the free movement of workers, because they do not enter the labour market of the state where they are providing the services.
There have been complaints that the Irish government has failed to enact the EU's "Posting of Workers" directive into law.
The Commission in today's report highlights the absence of administration co-operation between member states, and "the general unsatisfactory access to information and cross-border enforcement problems".
The Commission said Ireland's situation "reflected the general picture where efforts had been made to inform workers of their rights, but there was little contact with other member state authorities".
The Commission says it will improve the situation by setting up a high level committee of government experts, involving social partners, "to allow the exchange of good practices".
But Dublin Labour MEP Proinsias De Rossa has accused the Commission of failing to protect basic employment standards in Ireland by not addressing the issue directly.
"At the February 2006 EP Plenary Session, I drew the commission's attention to the fact the Irish government had not enacted the 1996 Posting of Workers directive into Irish law in line with the criteria established by the European Court of Justice, namely for a specific and explicit transposition measure."
There were numerous "loopholes" to be addressed and the EU and the incoming government must ensure workers in Ireland have the full protection of EU and national employment laws, he said.
The issue has arisen in Ireland on a number of occasions most notably in 2005 when Turkish staff employed by construction firm Gama had pay and their work permits withheld.