Business Secretary Kwasi Kwarteng is expected to announce the plans this week, which marks the latest stage of the long-running saga to introduce more robust tipping laws.
According to The Sun, which first reported the story, workers will become 'legally entitled to receive 100% of tips' left to them.
However, it is not known whether the legislation will prohibit credit card and banking administration charges being taken from tips, which can typically lead to a small reduction in gratuities.
A Whitehall source told The Sun: “Workers going above and beyond for their customers can rest assured hard-earned tips will go directly in their pocket and nobody else’s.
“We’re ending dodgy tipping practices.”
Earlier in the summer, Dean Russell, the Conservative MP for Watford, put forward a private member’s bill to bar restaurants from keeping staff tips.
Deductions made by operators would be forbidden under the bill, with staff to either keep the money received by them directly or agreeing a pooling system with colleagues.
“When we look at the role that many people have when working in bars or restaurants and so on, the tips are often seen as part of the salary in a way — rightly or wrongly,” Russell said in July.
“It’s always felt wrong that businesses can take the tips that have been given by the customer directly to that individual or to the staff for businesses to go, ‘Well, actually, that’s part of the payment for what they’re getting’.”