JobSeeker will be overhauled under the biggest proposed overhaul of welfare payments in a generation. 

Employment Minister Amanda Rishworth today announced a new assessment process and three-tiered system, replacing the current one-size-fits-all approach, so jobseekers receive help that suits their situation.

The tiers include a digital service for people ready to work, provider-led support for people who need help to build skills and confidence and intensive support for people facing complex barriers.

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Rishworth told the National Press Club the current $2 billion system is "ill-equipped" to address the needs of the one million people it supports.

"A one-size-fits-all approach across all elements of Workforce Australia is letting too many participants fall through the cracks and creating inefficiencies in the system," she said.

Under the $312 million package, the government will also introduce new mutual obligations that connect to each person's goals and a planning tool to help people work towards them.

Rishworth has launched a discussion paper and formed an advisory group to hear feedback on the design of the changes.

"This is major, complex reform, but it will be worth it to realise the benefit of employment services system, to make sure it's functioning for the jobseekers who need it," she said.

Greens Senator Penny Allman-Payne said the changes were not a shake-up but a "screw-up".

"One million people have been waiting for years for Labor to reform John Howard's employment services system so that it actually helps them find work and doesn't coerce and punish them," she said.

"But what they've discovered today is that Labor is continuing to prop up a system which punches down on welfare recipients."

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The employment services system has faced years of criticism for its effectiveness, with a 2023 white paper finding that it cannot adequately respond to diverse needs and people were falling through the cracks.

In her address, Rishworth said jobseekers need high-quality providers as she pointed out problems in the current system.

She said providers are not considering whether a person is being placed in a suitable role, leading to about one in six people re-entering the system within a year and employers being too frustrated to engage with the system.

Providers are also failing to help people with complex needs, with 20 per cent of the caseload being parked for more than five years.

"If you're lucky enough to be healthy, with a recent work history and a post-secondary qualification, you are closer to the labour market," she said.

"Therefore, a provider is more likely to be able to help you find a suitable job, because the way providers are paid means that they are incentivised to focus their efforts on those who fit this narrow profile rather than supporting everyone on their caseload."