The secretary of state has told the House of Commons that he will publish an emergency bill aimed at recalling the Northern Ireland Assembly.
The Stormont government has been suspended since October 2002
Mr Hain told MPs that it was down to politicians in Northern Ireland to complete the process of devolution.
"We will aim to discuss with the parties next week how the assembly will function after 15 May, including its standing orders," he said.
The bill is to be published on Thursday.
It will allow for the assembly to be brought back on the basis that it elects a first minister and deputy first minister on a cross community basis and then forms an executive under the d'Hondt formula.
The d'Hondt system, named after a 19th century Belgian lawyer, is based on the "highest average method" and is aimed at ensuring cross-community representation.
The mathematical formula seeks to reflect the strength of a party's total support by taking into account its share of votes in relation to the number of seats already won.
The government will recall the assembly in May, with a deadline of 24 November for electing a power-sharing executive.
Mr Hain said on Tuesday that Northern Ireland was in danger of being "left behind" as the rest of the UK and the Republic of Ireland advance.
"It's now for Northern Ireland's politicans to catch up, and catch up fast. Northern Ireland's people demand nothing less," he said.
Mr Hain said Northern Ireland's political leaders and assembly members must decide if they wanted to take responsibility for the future.
"They must decide to bring an end to Northern Ireland's democratic deficit, or to see locally unaccountable direct rule stretch into the foreseeable future," he said.
On 6 April, British and Irish prime ministers Tony Blair and Bertie Ahern travelled to Northern Ireland to unveil their blueprint for restoring devolution.
They confirmed the assembly would be recalled on 15 May with parties being given six weeks to elect an executive.
If that fails, the 108 members get a further 12 weeks to try to form a multi-party devolved government. If that attempt fails, salaries will stop.
The British and Irish governments would then work on partnership arrangements to implement the Good Friday Agreement.
SDLP leader Mark Durkan said he was glad there were no "order in council powers" to adjust the workings of the institutions.
"We would not be happy to see the secretary of state take such powers in relation to institutions that were uniquely mandated by the whole of the people of Ireland," he said.
DUP deputy leader Peter Robinson said what he called "the threat" in Mr Blair's statement on the 24 November deadline was "crass and foolish" and contrary to "any concept" of the principle of consent.
"We want to move into devolution, we want to have an executive in Northern Ireland," he said.
"But the principle of the mandate that we have indicates that we can only share power with those that are committed to exclusively peaceful and democratic means."
Mr Hain said there were "absolutely no threats" to the constitutional status of Northern Ireland - both in Mr Blair and Mr Ahern's statement, nor in anything he himself had said at the despatch box.
The UUP's Sylvia Hermon asked how Mr Hain could talk about the importance of local government while the Northern Ireland Office was "driving through wilfully" the legislation that would "set in stone" seven super-councils to replace the province's current 26.
Mr Hain said the policy had "widespread support" and must be "pressed ahead with" to ensure the new boundaries were in place for the next local elections in May 2009.