Students are being put at risk and the tax department is missing out from under-the-table jobs arranged through Student Job Search, students say.
David Tilson has been finding work through government-funded Student Job Search for several years to pay for his studies.
He said in two or three of the long-term positions he had held, his employer had not paid tax or ACC levies on his wages.
"For elderly people where it's a one-off thing helping out in the garden, you don't mind cash in hand but some are more professional outfits just wanting slave labour."
He said he worked for a waterblaster who did not pay tax or ACC levies on his pay. Tilson quit over worries that if he fell and hurt himself, he would have no cover.
"They're just professionals offering $15 an hour so they don't have to worry about IRD or ACC. But what happens if you fall down a ladder?"
SJS works with more than 20 tertiary institutions around the country and placed almost 2000 students in jobs last year.
Otago University Students Association spokesman Alasdair Johnston said the student union was aware of the problem. And with enrolments up and the number of jobs down this year, he thought it would become more of an issue.
Tilson said employers should have to sign a contract with SJS saying they would abide by the law.
Employment relations lawyer Michael Smyth agreed.
If an accident happened, however, the student would be able to claim ACC, although it might lead to a fine for the employer when the arrangement was revealed.
But, he said, even if business was done under the table, the worker was still covered by the Employment Relations Act.
Every employee had to have an employment contract or employers could be fined. "If an employer is not paying PAYE contributions, that's the employer's liability, and it's illegal."
What a worker received in the hand would be considered nett pay. If the arrangement was found out, an employer would have to pay tax on top of that.
Kate Ross, director of Kinetic Recruitment, said her agency would not touch employers who did not run employment agreements by the book. "We've got to cover ourselves. We have documentation coming out our ears."
National Service Delivery Manager for SJS, Justine Hastings, said in Tilson's case, Student Job Search was responsible simply for the referral. It was up to employers to fulfil their obligations.
Hastings said the service was funded by the Ministry of Social Development, which wanted students in jobs to keep them off benefits. Susan Kosmala, head of StudyLink, said employers had to abide by the rules when working with SJS.