Employers caught using illegal immigrants will face fines of up to £2,000 per person under new immigration rules planned by the government.
Labour also plans to introduce a points-based system for student and work migrants to ensure only those with skills lacking in the British workforce will be given the right to stay in the UK.
Home secretary Charles Clarke said an independent skills advisory body will be created to advise the government on labour market needs and skills shortages. New technology will record those entering and leaving the country, and all those applying for a visa will be fingerprinted.
Business groups have welcomed the move towards a more skill-rich migrant workforce.
CBI director general Digby Jones, said: "Well-managed migration, where new migrants' skills complement those of workers already here, is essential for the UK economy."
The Tories outlined their proposals on the issue of immigration last month.