The police will be given enhanced powers under the government's proposals
Police would be able to seize the wages of illegal workers as proceeds of crime under government plans to be set out in next week's Queen's Speech.
PM David Cameron will say on Thursday that it has become "too easy" for migrants not entitled to be in the country to exploit loopholes.
At the moment, firms can be fined up to £20,000 for employing illegal workers.
Labour said more needed to be done to protect the country's borders, and called for laws to tackle exploitation.
The proposal to treat the wages of illegal workers as proceeds of crime forms part of what the prime minister will say is a "tougher but fairer" approach to immigration that will be adopted by the Conservative government.
However, the scale of the challenge facing ministers in reducing levels of legal immigration will be highlighted again on Thursday when the latest official figures on net migration are published.
Net migration rose to 298,000 in the year to September 2014, well above the levels anticipated by the Conservatives - who pledged before the 2010 election to reduce numbers to less than 100,000, a target they acknowledge they have failed to meet.
BBC assistant political editor Norman Smith said with the latest figures expected to be "miles off" the Conservative target, ministers were shifting the emphasis of the immigration debate away from numbers towards "blue collar concerns" like jobs, pay and housing.
Speaking on BBC Radio 4's Today programme, Home Secretary Theresa May said immigration in the tens of thousands remained the government's "aim".
"It's the ambition that we have set out in our manifesto," she said.
Home Secretary Theresa May said the government had failed to meet its immigration target
Setting out how the target could be met, she said the Conservative government would "do some things that we wanted to do previously but we weren't able to do before because we were in coalition".
She also said the reforms would not necessarily need more investment in police and border services, saying they were about "making the system work better".
Mr Cameron will see first-hand efforts to combat illegal immigration on Thursday when he visits a premises in London shortly after it has been raided by immigration officials.
He will say the government is determined to "control and reduce" immigration, saying criminalising illegal workers must go hand-in-hand with other measures to lower demand for migrant labour, such as boosting the skills of UK workers.
The Conservatives acknowledge they failed to meet a target for reducing net migration since 2010
The government says depriving illegal migrants of their wages will make it harder for them to remain in the UK.
A new criminal offence of illegal working will apply to migrants who have entered the country illegally and also those who came to the country legally but are in breach of their conditions or have overstayed.
At the moment, migrants with current leave to remain who are working illegally in breach of their conditions may be prosecuted and are liable, if convicted, to a six months' custodial sentence and-or an unlimited fine.
But migrants who entered the UK illegally or have overstayed their leave are not subject to the same sanctions, and the police do not have the same powers of confiscation in all cases.
Mr Cameron will say that "making Britain a less attractive place to come and work illegally" is a crucial part of a fair immigration policy - adding that a "strong country is one that controls immigration... not one that pulls up the drawbridge".
"The truth is it has been too easy to work illegally and employ illegal workers here," he will say in a speech in London.
"So we'll take a radical step - we'll make illegal working a criminal offence in its own right.
"That means wages paid to illegal migrants will be seized as proceeds of crime… and businesses will be told when their workers' visas expire… So if you're involved in illegal working - employer or employee - you're breaking the law."
However, lawyer Saira Grant, director of the Joint Council for the Welfare of Immigrants, questioned how the new measure would be enforced.
"We're talking about people who're illegally here, working cash-in-hand below the radar," she said.
"Are the wages going to be seized retrospectively? But more importantly we are talking about very vulnerable people, with very little money as it is, often supporting families."
She added that extending the "deport first, appeal later" principle to all non-asylum cases, another measure set to feature in a forthcoming immigration bill, would be "extremely detrimental to access to justice".
Among other proposed measures are new powers for councils to deal with unscrupulous landlords and to evict illegal migrants more quickly, while all foreign criminals awaiting deportation will be fitted with satellite tracking tags.
It will also become an offence for businesses and recruitment agencies to hire abroad without first advertising in the UK - a policy which featured prominently in Labour's election manifesto.
Ministers say the package builds on the progress made over the past five years but critics say the Conservatives' tough rhetoric has not been matched by action on the ground, either in tackling illegal immigration or curbing legal immigration.
Labour welcomed the action but said it did not go far enough.
"A lot of this will look very familiar to anyone who read Labour's manifesto," shadow immigration minister David Hanson said.
"It is clear the measures outlined here will not be sufficient to tackle exploitation. There needs to be a clear offence of exploitation that undercuts local jobs and wages, which the police and other experts have called for."
Figures published in February showed that not only is net migration 50,000 higher than when Mr Cameron came to power, but even non-EU migration - which ministers had claimed to have brought under control - has been increasing rapidly.
Don Flynn, of the Migrants' Rights Network, said seizing wages would force some people into "systems of modern slavery without hope of protection from the law".
"Irregular migrants in the UK fit no one's image of a law-breaker living on the proceeds of crime," he said.
"Their vulnerable status means they are confined to the most insecure and exploitative forms of employment, usually earning scarcely enough to maintain themselves on a day-to-day basis."
The Joint Council for the Welfare of Immigrants said the measures would do nothing to ease the pressure on public services.