Ministers are to reconsider how they communicate with people on back-to-work schemes who have their benefits taken away for infringements of the rules.
Letters sent to those being penalised were "legalistic" and lacked personal explanations of why they were being pursued, an external review has found.
While most people had an "adequate understanding" of their obligations, it said the vulnerable often did not.
The government said the system must be fair to both claimants and taxpayers.
Jobseekers have long faced some sanctions if they are deemed to be not making an effort to find work - but in 2012 the coalition introduced tougher penalties for those who fail to comply with their obligations under the Work Programme and other mandatory back-to-work schemes.
Those failing to attend meetings with Jobcentre Plus advisers or to participate in employment schemes can have their Jobseekers Allowance (JSA) stopped for four weeks for a first offence and 13 weeks for a second.
More serious transgressions, such as leaving a job without "good reason", refusing work offered or failing to take part in a mandatory work scheme when asked, carry potential sanctions ranging from the loss of benefits for 13 weeks for a first offence to three years if someone infringes the rules for the third time within a year.
While claimants at risk of being sanctioned have the right to have the decision reviewed and, if this proves unsuccessful, heard by a tribunal, critics have said the sanctions are too punitive and not transparent enough.
An independent review by former civil servant Matthew Oakley into how JSA claimants on mandatory work schemes are told about potential penalties found that sanctions were a "vital backstop" but raised a number of concerns and urged a series of improvements.
His main recommendations, which have been accepted by ministers, are:
- All correspondence with claimants, including its style and content, should be reviewed
- Claimants must be given personalised information about why they have been referred
- Clear information must be given about the appeals process and access to hardship payments
- A guide to benefit sanctions must be easily accessible in hard copy and online
- Claimants who need particular help in understanding letters must be identified and spoken to
- People should get information through their "preferred channel"
- Procedures should be reviewed to ensure people have a clear understanding of their responsibilities
The review found that about 1.015 million cases had been referred for consideration for sanctions in 2013, the vast majority relating to people on the Work Programme.
Following reviews and appeals, 28.7% of cases ultimately resulted in a decision to remove benefits while 71.3% did not. More than 40% of initial sanction decisions were overturned after a review.
Mr Oakley, who now works at consumer group Which?, said a "relatively small number" of people had been sanctioned and that the system was "functioning adequately" for the majority of people.
"This suggests that the majority of claimants are fulfilling the obligations placed on them...In short, this is not a system which is fundamentally broken."
But he raised concerns about the reliability of data about sanctions and said figures showed less than one in four people who had had their benefits docked had been told about hardship payments.
"This review has found that some claimants lacked a detailed understanding of the requirements being placed on them and the processing surrounding sanctions," he added.
"This was particularly found to be the case for some more vulnerable groups...If the sanctions regime and wider social security system is to be both fair and effective, it is essential these issues are addressed."
Employment minister Esther McVey said a special team would be set up to "update" all correspondence and insisted the government was "committed to continuous reform of the sanctions system to ensure it remains fair to taxpayers and to claimants".
Campaigners welcomed the decision but said the review had been "too narrow" and called for more fundamental changes to the sanctions regime.
"Sanctions cause severe financial hardship for those affected, particularly for single parents who are cut off from the financial support they need for themselves and their children," said Fiona Weir, chief executive of Gingerbread - which speaks on behalf of single parents.