The Government's flagship welfare-to-work programme deserves credit for producing results at least as good as previous systems at a "greatly reduced" cost, but should do better, MPs say.
The Work and Pensions committee says 70% of Work Programme participants are still not getting longterm jobs and "we owe it" to them "to do much better".
The MPs said the £5bn Work Programme - launched in 2011 - was "not working well" for people with complex problems.
Ministers say it is "a real success".
The programme, which replaced a number of different schemes in operation under the last Labour government, is aimed at helping the long-term unemployed find a job.
It is run by providers who offer support and training to people on jobseeker's allowance (JSA) and employment and support allowance (ESA). The providers are paid on the basis of the number of people finding and staying in work.
The committee said nearly 70% of people who had completed their two-year attachment to the scheme, which applies in England, Scotland and Wales, had failed to find sustained employment.
The MPs recommended a series of changes to the "complicated and less than effective" payments model when the current contracts expire in April 2017.
People with drug and alcohol addiction, illiteracy and innumeracy and the homeless should be better served, the committee said.
A separate, specialist scheme for people with "substantial disabilities" would also help the government meet its goal to halve the employment rate gap between disabled people and non-disabled people, the MPs added.
Committee chairman Frank Field said the Department for Work and Pensions (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 the Labour MP added: "We must not forget that nearly 70% of participants are completing the Work Programme without finding sustained employment. We must do much better."
'Value for money'
The Employment Related Services Association, which represents the programme's contractors, welcomed the "hugely positive" report and said the next round of contracts had to "build on success".
"However, the sector is working with jobseekers with ever greater barriers to work and thus the government has to ensure the next round of programmes also has the right financing in place," said its chief executive Kirsty McHugh.
The body called for earlier referral of jobseekers, rather than allowing them to stay on benefits without specialist support, and moving to an assessment process based on the needs of jobseekers rather than the benefits they received.
A DWP spokesman said it would respond to the committee's recommendations "in due course" but pointed out that 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 that 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."