“It is hoped a decision would be made towards the end of the year before proposals could be finalised.”
A Palace source said “any Government proposal would be carefully considered”.
An insider with knowledge of the plans revealed local groups, including charities and businesses will be invited to nominate a community hero they believe should be honoured.
Thousands are expected to be put forward which could lead to a raffle system being implemented, like the process for the Queen’s diamond jubilee concert on the Mall in 2012, when there were 240 applications for each pair of tickets.
Organisers are hopeful the Queen would be able to attend, potentially alongside Prince Charles, the Duchess of Cornwall and the Duke and Duchess of Cambridge, who have all highlighted the work of the emergency services and key workers throughout the crisis.
William, 37, worked as a helicopter pilot for the East Anglian Air Ambulance for 18 months between 2015 and 2017 before stepping down to take on more royal duties on behalf of the Queen.
The 94-year-old monarch is said to be keen to find ways of honouring the sacrifices by so many Brits throughout the pandemic.
During lockdown she broadcast two historic statements to the nation, as well as taking part in her first ever public video call this week to celebrate Britain’s seven million unpaid carers.
During one in April, as the pandemic took hold, the Queen made a televised address – just the fifth of her 68-year reign – to declare: “Better days will return, we will meet again.”
She added: “I want to thank everyone on the NHS front line, as well as care workers and those carrying out essential roles, who selflessly continue their day-to-day duties outside the home in support of us all.
“I am sure the nation will join me in assuring you that what you do is appreciated and every hour of your hard work brings us closer to a return to more normal times.”
The Queen, who had to cancel all events this summer, also appeared in a special royal family video to pay tribute to health staff last month on International Nurses Day.
Until recently there had been weekly applause for key workers around the country every Thursday night as the nation gave thanks for their efforts.
Every summer the Queen normally holds three garden parties at the Palace to recognise contributions of individuals to national life. Nobody can ask for an invitation, and those who receive one will be unaware until it arrives. Another is held at Holyroodhouse in Edinburgh.