MPs warned the Work Programme, which had seen only 3300 out of the 86,420 participants in Scotland secure a job by last summer that had lasted more than six months, was "extremely poor".
The House of Commons Public Affairs Committee (PAC) said the programme is failing the young and those with disabilities in particular.
Using official figures from the first full year, a PAC's report found that between June 2011 and July last year none of the UK's 18 providers, including two in Scotland, met their contractual targets.
Some helped just 2% of those on their schemes into employment.
The average was only 3.6% UK-wide, less than one-third of the 11.9% target set by ministers and less than if the Coalition had done nothing at all.
The Government had stated it was prepared to pay up to £14,000 per case, and up to £5 billion over five years, to help people into work.
But there was concern in Scotland when it was revealed that leading social enterprises, such as the Wise Group, had missed out on contracts in favour of private companies.
Margaret Hodge, the Labour MP and PAC chairwoman, said the programme's performance was not only extremely poor, but "so poor that it was actually worse than the department's [Work and Pensions] own expectations of the number of people who would have found work if the programme didn't exist".
She added: "None of the providers managed to meet their minimum performance targets.
"The programme is particularly failing young people and the hardest-to-help.
"It is shocking that of the 9500 former incapacity benefit claimants referred to providers, only 20 people have been placed in a job that has lasted three months, while the poorest performing provider did not manage to place a single person in the under-25 category into a job lasting six months."
Ms Hodge, who wants failing providers called to account, warned that the payments system was not helping hard-to-reach cases amid increasing evidence of "creaming and parking".
MPs also warned that due to the poor results, there was a high risk that one or more of the providers will go bust or see their contracts cancelled.
John Downie, director of public affairs for the Scottish Council for Voluntary Organisations, the umbrella body for voluntary groups, said it provided further proof the scheme was not working.
He added: "The only thing the scheme achieved was allowing private companies to make millions on the back of the misery of worklessness."
TUC general secretary Frances O'Grady said: "The Government's Work Programme has spectacularly under-achieved, even by its own modest targets. It has failed those in greatest need, especially unemployed young and disabled people."
Katja Hall, from the CBI, said: "The programme is in its infancy and gains will come over the longer term."
The Department for Work and Pensions said the report was skewed. A spokesman added that 31,000 people have been in a job for more than six months and more than 200,000 were off benefits and in employment.
"It is making a real difference to tens of thousands of the hardest to help jobseekers," he added.