Work Programme advisers are advising some unemployed people to register as self-employed even where they have no viable business, a BBC investigation has found.
Advisers encouraged the move to allow their clients to claim more working tax credits, and to enable their companies to claim payments.
The organisation that represents Work Programme providers denied that they had incentives to move people to self-employment.
"It is only right that work programme advisers help jobseekers explore all possible avenues for work and for some self-employment is a really good option," said the Employment Related Services Association's chief executive Kirsty McHugh said.
But the BBC website says, "5 live Investigates has spoken to clients of six different providers across Britain, who said that they were encouraged to either pretend to be working for themselves or to set up businesses they did not consider viable."
One client who was spoken to, Joanna, had been out of work for several years, and was encouraged to set up her own gardening business.
A single parent would need to work for 16 hours per week to be eligible for tax credits, but according to Joanna her adviser had hinted that these rules were not set in stone.
"It was suggested to me that in the winter - when I have a down season and I would probably have no hours work a week - that I could invent the whole 16 hours a week, which I think is totally unacceptable.
"I think that they are probably quite desperate to get people into work and off jobseeker's allowance in order that they get paid."
Providers get paid for each client they find employment for, with further payments made if the client stays in work.
But self-employment outcomes are treated the same as jobs, regardless of whether any business plan is viable or whether the client finds contracts.
Giving evidence to the Work and Pensions Committe in the Houses of Parliament in December, Professor Roy Sainsbury of York University identified this as a weakness of the Work Programme:
"You could stay there [in self-employment] for a while - even six months or a year - before anyone really takes much interest in you from the tax credit perspective. I am beginning to feel that there is an easy route here for work programme providers to channel people into self-employment."
Tax credits can be reclaimed if the person who received them can be shown to have worked for fewer than 16 hours per week over the period in which they were paid.
To listen to the Radio 5Live investigation, click here