Hospitality venues will be banned from keeping tips customers have left for staff as part of planned legislation.
The potential new laws will make it illegal for cafes, restaurants and pubs to withhold the money from employees.
If companies break the new rules then they could be taken to an employment tribunal by staff and be forced to pay fines to compensate employees.
The Department for Business say the legislation would help two million people and should be in place within the next 12 months.
Paul Scully, the labour markets minister, said: “Unfortunately, some companies choose to withhold cash from hardworking staff who have been tipped by customers as a reward for good service.
“Our plans will make this illegal and ensure tips will go to those who worked for it. This will provide a boost to workers in pubs, cafes and restaurants across the country, while reassuring customers their money is going to those who deserve it.”
Tips given via card payments give the businesses the option to decide whether to pass them on or not, whereas cash gratuity is automatically the property of staff.
It is hoped the new rules will help attract to an industry that has seen labour gaps in the market.
Commenting on plans for new tipping legislation Kate Nicholls, CEO of UKHospitality said: “UKHospitality supports the right of employees to receive the deserved tips that they work incredibly hard for.
"The hospitality sector as it begins to rebuild after 18 months of restrictions and enforced enclosure is already creating new jobs and driving the jobs recovery.
"Ensuring employees receive the tips they earn will further strengthen the sector’s ability to create jobs and support the wider economic recovery."