The think tank has called for existing schemes - including Jobcentre Plus and the Flexible New Deal - to be contracted out to private, third sector or state organisations, and contractors should be paid based on their results, with more financial reward for placing the most difficult to help applicants.
The organisation also proposes employment advisers should be given the freedom to identify what will work for an individual jobseeker rather than having to fit them into a one-size-fits-all employment package.
According to the SMF's analysis of data on jobseekers allowance, two out of five claimants who find work are back on benefits within six months and it believes these changes will allow the Government to best focus its efforts on ensuring its work with long-term unemployed succeeds.
Ian Mulheirn, director of the SMF, said: "Two out of every five claimants helped to find work are back claiming jobseeker's allowance within six months. There is clearly something very wrong with the system as it currently stands. Revolving door employment fails the taxpayer who pays for the schemes and the benefits, but it also fails the individuals and the ‘low pay, no pay' cycle has hugely detrimental effects on their future employment chances, health and families."
Government schemes to get unemployed back to work need to be overhauled
The Government's efforts to get people off benefits and back into work are failing, according to the Social Market Foundation (SMF).
