Nearly 70% of people who complete a flagship welfare-to-work scheme fail to find sustained employment - and the programme needs to better identify claimants who need more personalised and intensive support, MPs have said.
The Commons Work and Pensions Select Committee said the scheme was "not working well" for people with complex problems who need more intensive help.
The MPs recommended a series of changes to the "complicated and less than effective" payments model when the current contracts to deliver the Work Programme and the specialist disability employment scheme Work Choice expire in April 2017.
The committee acknowledged that the Department for Work and Pensions' (DWP) payment-by-results programme was "at least as good" as its predecessors, at a much lower cost to the taxpayer.
But the MPs added that "too many long-term unemployed people remain out of work after two years on the programme".
Committee chairman Frank Field said: "DWP deserves credit for implementing a programme which, in general, produces results at least as good as before, for a greatly reduced cost per participant.
"But we must not forget that nearly 70% of participants are completing the Work Programme without finding sustained employment. We must do much better.
"Our recommendations aim to create an employment support system which is equipped to help into work people facing serious problems who have been distant from the labour market, and inadequately supported, for far too long."
The committee said the DWP should develop a new assessment of claimants' barriers to employment and replace the Work Programme's "complicated and less than effective differential payment model" with a "much simpler" system.
The department should ensure that all people on the programme receive an "acceptable" level of service by introducing a single set of minimum standards.
The MPs also recommended that the Government should maintain, and ideally expand, a separate employment programme for disable people.
Mr Field said:"The Government's very ambitious aspiration to halve the disability employment gap must be reflected in the configuration of DWP's contracted employment programmes.
"Helping over one million more disabled people into work won't be achieved without an effective employment programme, delivered by specialists.
"For reasons of cost, the Government may be tempted to consolidate mainstream and specialist disability employment support into a single new programme. We think this would potentially be a grave mistake."
A DWP spokesman said: "Almost half a million of the hardest to help claimants have been supported into employment through the Work Programme. That's a real success, and we welcome the committee's finding the programme is better value for money to the taxpayer than any previous scheme.
"The programme helps people to overcome barriers to finding a job, including those with drug and alcohol problems and the long-term unemployed, and further intensive support is offered through Help to Work for those who complete the Work Programme without finding a job."