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By Ingrid Melander

BRUSSELS, May 16 (Reuters) - The European Commission launched plans on Wednesday for a crackdown on employers of illegal migrants, threatening fines and possibly jail sentences for the worst offenders.

"The possibility of finding illegal work is the main driving force behind illegal immigration. The EU must act together," EU Migration Commissioner Franco Frattini said.

An estimated 600,000 legal immigrants and 350,000 to 500,000 illegal migrants enter the 27-nation bloc each year, the EU says. Many end up in the building and farm sectors.

The draft legislation proposes banning anyone caught employing illegal migrants from taking part in public procurement contracts or receiving subsidies for up to 5 years.

Firms employing illegal workers could in some cases be temporarily or permanently closed. Employers breaking the rules could also be asked to reimburse EU subsidies. The rules would be enforced by more thorough checks than is currently the case.

For the worst abuses involving human trafficking or repeated employment of illegal workers, the plan would force EU states to impose tougher punishments, officials said. EU states would be free to decide if that meant fines or a jail sentence.

The proposal needs to be approved by EU governments and EU lawmakers to become law.

Frattini said less than three percent of companies were checked in the EU every year and that each country should now make sure it checks at least 10 percent.

Denmark does not take part in the EU's migration policy and will therefore not have to apply the proposed legislation on illegal workers, Commission officials said. Britain and Ireland can chose whether to take part or not.

SEASONAL WORKERS

In a parallel move, the EU executive said on Wednesday EU states should give so-called "multi-entry visas" to migrant workers -- allowing them multiple visits to the EU -- and help them return home after plugging gaps in the EU labour market.

"We need seasonal workers in agriculture, tourism, construction," Frattini said. Europe has an ageing population and is looking to workers from outside the EU to fill jobs ranging from hospital nurses to farmhands.

But the issue is sensitive both in the EU and outside. Some developing countries accuse Europe of stealing some of their most qualified workers and creating a local "brain drain".

The EU executive hopes a tough line on illegal migration will help convince national capitals to take a more liberal approach on legal migration.

"Being tough here means we can offer legal alternatives to illegal migration, without undermining the credibility of Europe's migration policy," Frattini said in a statement.

Frattini wants EU states to give the Commission mandates to negotiate migration deals with African countries and its eastern neighbours. The EU would offer easier visas or more job opportunities, and require other states to agree to take back illegal migrants.

Immigration became a particularly hot issue in the EU last year when an unprecedented 30,000 Africans arrived in the Canaries on rickety boats in the hope of finding work in the wealthy bloc. Malta and Italy face similar problems.

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