The Gulf State of Qatar has come under pressure to drop rules tying migrant workers to a single employer amid an influx ahead of the football tournament.
Human rights campaigners have accused Qatar's current sponsorship system of being akin to modern day slavery. The draft law is part of a range of proposed labour reforms but there is no schedule for their implementation.
Expatriates make up the bulk of the workforce in the country.
More than 180 migrant workers died in Qatar last year and a significant number are believed to have suffered injuries as a result of unsafe working practices.
There have also been complaints about the standard of accommodation many workerrs live in.
The proposed changes were announced at a news conference in Doha on Wednesday. Officials said they hoped to introduce "a system based on employment contracts", as part of a reform package.
The reforms are also designed to end the longstanding requirement that foreign workers obtain their employer's consent before lkeaving the country.
This received global attention after a French - Algerian footballer was forced to stay in the country for nearly two years over a dispute with Qatari club El - Jaish over unpaid wages.
Human rights groups have long urged Qatar to scrap the sponsorship system, saying it leaves workers open to exploitation and abuse.
In February, organisers of the 2022 World Cup published plans to improve the rights of workers after FIFA, the world football's governing body, pushed them to do so. The proposed changes fall short of the fundamental changes needed to address systemic abuses against migrant workers.
Qatar is reported to be spending more than $200bn (£121bn) on a series of infrastructure projects.