Two pilot schemes under the Government's much maligned Work Programme will see private contractors given cash bonuses if they help get addicts back into "lasting employment".
Speaking at the first ever Recovery Festival in London yesterday, Smith insisted employees should not be put off by the "misconception" that employing people who have been put through rehab is "overly risky".
He said: "They can be highly-motivated, loyal and committed workers and all the more grateful for the opportunity because of their history."
The pilot schemes will be set up in West Yorkshire and east of England and contractors will receive extra bonus payments for working with claimants who are engaged in rehabilitation programmes.
Another scheme will test whether closer co-operation between Work Programme providers and rehabilitation treatment providers can deliver "better outcomes" for addicts, getting more of them into employment.
In a speech to Alcoholics Anonymous in May last year Smith said addicts who are unable to work had been let down by the welfare system and the state must go further to help drug and alcohol addicts recover and make them employable again.
Official figures revealed last year that more than 77,000 people are receiving benefits because their addiction to alcohol or drugs makes them unable to work.
