The first national research of its type by the Gillard government's Fair Work Building and Construction inspectorate has found up to 13 per cent of the nation's building workers employed on ''sham contracts''.

This means they are working in conditions identical to being a permanent employee - but are being paid as if they are an independent contractor providing a service for a fee.

Hiring a worker who should be a permanent staff member on a sham contract is illegal, because it allows the employer to avoid paying superannuation and leave, and to avoid the risk of hiring permanent staff.

Construction industry employer groups say this type of illegal contracting is not widespread.

But unions believe illegal contracting is rife in Australia, particularly in construction.

Leigh Johns, chief executive of the Fair Work Building and Construction authority that commissioned the research, estimated that 50,000 workers in construction could be on sham contracts.

''This means they are missing out on entitlements like annual and sick leave and their employer making superannuation contributions,'' he said.

The research finds that 9 per cent of all contractors in construction are working for one employer only. And the practice of illegally contracting instead of hiring permanent staff has become particularly prevalent among non-English speaking workers.

It follows a 2011 inquiry into unlawful contracting. Separate research in 2011 by the Construction Forestry Mining and Energy Union found up to 168,000 people on illegal contracts in the building industry.

The union's construction division national secretary, Dave Noonan, attacked employer groups, saying that some, such as the Master Builders Association, downplayed the problem.

''Companies that employ workers legitimately are becoming increasingly frustrated that the organisation that's meant to represent them and their interests are instead representing those who break the law,'' he said.

But Brian Welch, executive director of the Master Builders Association in Victoria, said there was no widespread issue with illegal contracting. ''This is not an endemic problem.''

Construction unions, Mr Welch said, ''keep on banging this drum because it suggests to their existing membership they are aggressively looking after their interests''.

Employers largely did the right thing.

The research questioned 900 workers about their experiences of contracting. Almost half said they had lower job security because they were hired as a contractor, while a quarter said they got paid inconsistently.

The Fair Work Building and Construction office has successfully brought only four civil proceedings against companies that illegally contract permanent workers.

In one case, Queensland building firm Supernova was penalised $12,000 by the Federal Magistrates Court in November. Supernova had hired an 18-year-old worker as an independent contractor, telling him to invoice the firm for his work.

But he was not an independent contractor because he used Supernova's tools, worked solely for Supernova, and did not operate a company himself or advertise his services.