Mutual obligations will be different for every welfare recipient, the employment minister says, signalling an end to jobseekers being forced to submit “endless” applications for roles they may not be qualified for.

But welfare advocates and a key trade union have said Labor’s employment system changes don’t go far enough and fall short of the reform needed in the failure-plagued sector – they have called for an end to the privatised job services model, which Amanda Rishworth admits is not providing enough help.

Rishworth’s address to the National Press Club on Wednesday outlined an overhaul of the employment services system, with the current “one size fits all” model to be split into three separate streams, depending on a jobseeker’s level of skills and work readiness:

• At the lower level, a digital service with “individualised resources and brief interventions” for people who are work-ready but need help finding the right job fit.

• A “targeted provider-led” stream to help people build skills and confidence to gain employment.

• And at the upper end, more intensive services for people with complex requirements, who will be given more time, flexibility and support to build their confidence and capabilities.

Rishworth said unemployed people were “languishing” with insufficient help, due in part to the current system incentivising job providers to ignore people with more complex needs in favour of people who are easier to place. The employment minister was critical that one in five people using the Workforce Australia program – around 140,000 people – had been in that stream for five years or more, a figure which was getting worse.

But the privatised model will continue, which the Greens senator Penny Allman-Payne said would see jobseekers “herded into a failed system”.

“These reforms aren’t a shake-up, they’re a screw-up,” she said.

“Labor’s own inquiry into employment services in 2023 concluded that privatisation had failed and that ‘fundamental change is needed’. The reforms suggest that Labor hasn’t read its own report.”

And despite a 2025 Commonwealth Ombudsman report finding nearly 1,000 people had their welfare payments unlawfully terminated, Allman-Payne was also critical the government hadn’t announced plans to reform that system.

The exact details of the new system were not announced on Wednesday and will be developed over the next year in a consultation process with employers, jobseekers and providers. But Rishworth did signal changes to mutual obligations activities, which she said were wasting the time of people who use welfare.

Guardian Australia has reported numerous examples of the mutual obligations system being unfair or cruel to users, or forcing people to complete menial tasks. These included people having Centrelink payments suspended while in hospital recovering from brain surgery or recovering from psychosis, and job training courses described as “condescending”.

While mutual obligations will remain, Rishworth said the activities must be “meaningful” and would differ depending on an individual’s circumstances.

“If you are close to the labour market, then putting in job applications in jobs that you’re interested in and that are in your goal plan are clearly an appropriate activity,” the minister said. “If you are very far from the labour market and do not have work ready skills, there is no point in that participant putting in endless applications.”

Rishworth gave the example of the disability job service Inclusive Employment Australia, which had changed compliance action to be a “last resort”.

“I don’t believe that people are going into the system and deliberately looking [at] how not to engage and contribute, but we need to make those mutual obligations meaningful to actually getting a job,” she said.

The Community and Public Sector Union welcomed the changes, but national secretary Melissa Donnelly was “disappointed it has not gone further to overhaul the privatised model that has failed job seekers, employers and the government”.

“Australian job seekers are sick of being lectured by flashy ‘entrepreneurs’ who are milking the government for hundreds of millions of dollars and providing a broken, profit-driven service in return,” she said.

“This privatisation fantasy has caused untold damage, and while today’s announcement is very welcome, progress must not stop here.”

Economic Justice Australia, part of the working group to consult on the changes, also said changes were needed to the privatised model.

“Wherever privatised employment service providers are given the power to suspend people from essential payments, not only will there always be a power imbalance, there will be a direct threat to people’s ability to survive,” said its chief executive, Kate Allingham.