Employers who knowingly hire illegal immigrants could be jailed for two years under new measures coming into force today.

Unscrupulous bosses could also be hit with an unlimited fine, as part of changes which the Home Office claim amount to the biggest immigration shake-up in a generation. Firms which are negligent about checking whether their employees have the right to work in Britain could also be hit with a £10,000 on-the-spot fine for every illegal immigrant they hire.

The first stage of the Government's much-trumpeted points-based system also comes into force today.

The initial tier to be implemented will apply only to highly-skilled workers who want to take jobs in the UK, and other elite workers already in the country who want to extend their visas.

Home Secretary Jacqui Smith said: "The introduction of our Australian-style points system will ensure that only those with skills the country needs can come to work and study.

"Today's proposals are part of the biggest changes to British immigration policy in a generation, which include a new deal for those migrants seeking citizenship here, a new UK Border Agency to strengthen controls at the border and the introduction of ID cards for foreign nationals."

Ministers also revealed that businesses which want to sponsor and employ migrants must be licensed by the Border and Immigration Agency.

A licence will be required from the autumn, when the second tier of the points-based system is due to come into effect.

Employers can begin applying for licences from today.

Sponsors will be rated "A" or "B" according to Home Office criteria.

The points-based system replaces 80 existing routes into the UK.