This means GPs in Britain will inform employers of tasks employees would be able to perform at work, rather than signing them off work with a sick note.
Health secretary Alan Johnson said: "Sick notes cost an estimated £100 billion per year - but helping people stay in work does not just have an economic imperative, it has a moral and social one too. Poor health can prevent people fulfilling their potential, leaving them more likely to slip into poverty and social exclusion."
Other proposals include support for disabled people or those who have become too ill to return to, or stay in, work by helping them manage their condition and get support to keep their jobs.
James Purnell, work and pensions secretary, said: "Now more than ever it is important to help people who are sick to stay in work so they can support themselves and their families.
"These proposals will help do just that. Everyone has the right to work and we will want to design a fair system that supports people so they can work when they are able."
An independent, authoritative body will be formed to provide support for the health of the working age population, and health, work and wellbeing co-ordinators will be employed to look at health and wellbeing issues in their areas.
The Government has also proposed a helpline for small businesses to provide employees with health advice. In addition it will investigate employee health and wellbeing within the NHS.
Dame Carol Black, national director for Health and Work, added: "I believe the measures unveiled by the Government will help make our society a healthier and happier one, where everyone recognises the link between good health and good work."
But Dr. Peter Mills, Chief Medical Officer of occupational health provider Vielife, added: "The key challenge for organisations is understanding what the actual health issues and risks of their workforce are. It’s crucial that the Fit note initiative is implemented closely with Occupational Health who will need to make sure people are placed in appropriate positions or under appropriate working conditions for their health status. This is our chance to use the health risk assessment tools and health improvement services out there to make a real difference in employee health and productivity as well as the bottom line."
