Parents who hire foreign nannies illegally could face £2,000 on-the-spot fines under planned immigration laws.
Ministers want to ensure confidence in border controls
Home Office Minister Tony McNulty said the penalties would be focused on larger firms but could be used against householders using illegal workers.
The Immigration, Asylum and Nationality Bill was unveiled on Wednesday as part of tightening immigration controls.
The plans also include allowing immigration officers to check biometric information, such as fingerprints.
By 2008, the government wants to fingerprint all visa applicants in line with how other nations are using biometric identity checks.
MAIN IMMIGRATION MEASURES
£2,000 fixed penalty fine for employers hiring illegal workers
Immigration officers allowed to check fingerprints
Border authorities allowed to share more data
The Bill would also allow the customs, immigration and police officers patrolling UK borders to share passenger information more easily as part of "electronic" border controls.
Security services MI5, MI6 and GCHQ will also get new powers to share data about passengers and freight and crew movements to and from the UK.
They would also be able to pass details to foreign law enforcement agencies.
And it would reduce the rights to appeal against decisions on applications for work and study visas.
The plans would mean only close relatives could appeal if they were refused permission to visit the UK to see their family.
The government says last year 3,330 employees were in the UK without permission to work.
Under the plans, employers could be fined £2,000 for each worker who was in the UK illegally.
Bosses will have to ask to see visa documents, copy them and check they are genuine, as well as checking "at prescribed intervals" whether workers are allowed to be in the UK.
Mr McNulty said it would be harder to get at householders hiring illegal workers but national insurance could be a key factor.
"If it is a full-time childminder living in the home and national insurance contributions are paid, then that is an employment contract clearly," he said.
It was less likely families would be fined for employing illegal immigrants working as plumbers or builders as hiring such tradesman was defined as buying a service under employment laws, he said.
Under the plans, anybody knowingly employing illegal workers could be jailed for two years or face an unlimited fine.
The government estimates it will cost businesses £27.2m to implement the new legislation.
It will take 12 immigration officers and an annual budget of £480,000 to run the fines scheme.
In a document published alongside the Bill, the Home Office said it was "inevitable" some firms would be forced out of business by the plans as illegal workers were often paid less than the legal minimum wage.
Ministers say immigrants make an important contribution to the British economy but the system must not be abused.
They want a points system to ensure migrants from outside the European Union have the right skills.
Details for the scheme will go out for consultation later this summer.
The Conservatives want Parliament to set a quota every year for the number of migrants allowed visas.
Shadow home secretary David Davis said ministers were "tinkering around the edges" instead of addressing fundamentals.
"Despite soaring numbers and soaring costs, the government still refuses to accept the need to set a limit on immigration," he said.
Liberal Democrat spokesman Mark Oaten said: "Increasing fines for illegal working will be meaningless unless this becomes a police priority."
The Lib Dems want quarterly quotas for immigration - but say they must be set by an independent commission, not politicians.