The Government announced a consultation on moves to ensure that additional payments for service should be voluntary to the consumer and received in full by workers.
Plans include updating the current voluntary code of practice and putting it on a statutory footing to increase employer compliance, increasing transparency for consumers to make it clearer that tips are discretionary, and preventing or limiting any employer deduction from tips except for those required under tax law.
Unite has been campaigning for Government action after complaining that some companies were counting tips as part of a worker's pay.
Business Secretary Sajid Javid said: "As a one nation Government we want workers who earn a tip to be able to keep it. That's why I, like many others, was disappointed by the tipping practices of some of our well-known chains. This has to change.
"I'm setting out our proposals to make tipping fairer, clamping down on unfair practices and securing a better deal for the millions of workers in the service industry. We will look closely at all the options, including legislation if necessary."
A call for evidence received nearly 200 responses and there was broad agreement that current practices were not clear for workers or consumers, and change was needed to better understand how tips are distributed.
Dave Turnbull, Unite's officer for the hospitality sector said: "This is fantastic news. It has taken us eight months to get this report to conclude but at long last it has come down on the side of the waiting staff.
"It is a massive victory for all those waiting staff who have worked tirelessly to expose sharp practices in the hospitality industry. All they want is what any worker wants - to take home what they have earned, no corners cut.
"But it will need the support of law to make this happen - it is patently obvious that too many employers do not respect the spirit or word of the voluntary code.
"This should be great news for consumers, too, who have been appalled to learn that the tips they left for their waiter or waitress never made it to them. Diners have been a huge support to the workforce - without their help we may not have ever won pay justice.
"The problem has always been that tips paid on a credit card and service charges are deemed the property of the employer. As they own them they can do what they like with them. Until staff are recognised as the lawful owners of their hard-earned tips with complete control over how they are shared out, rogue employers will continue to cream off staff tips.
"The minister's announcement, therefore, should send the message right across the sector that the days of using workers' tips to top up pay or to be swallowed up elsewhere in a business are over. "