The government's back-to-work scheme appears to be in disarray after Tesco announced it would immediately offer a wage to all benefits claimants working unpaid in its stores, and several big chains reported they were suspending involvement in the programme.

Tesco said that although it was sticking with the coalition's work experience scheme, it would now offer jobseekers a choice of remaining on benefits or taking up paid work with a guarantee of a staff job at the end of the four-week placement if the trial was successful.

Meanwhile, Argos and Superdrug said they were suspending their involvement pending talks with ministers from the Department for Work and Pensions to ensure that the scheme, which has been personally championed by senior coalition figures, is voluntary and that jobseekers would no longer fear having their benefits removed if they pulled out of placements after the first week.

Argos said it wanted "to ensure the scheme is voluntary … [and] no one is disadvantaged by working on this programme". The Arcadia group, which is majority-owned by the billionaire Sir Philip Green, said it would be terminating the pilot scheme at its BHS stores at the end of this month. Pizza Hut was reviewing its limited involvement at five of its stores.

Waterstone's, Sainsbury's and TK Maxx have already withdrawn from the scheme, and in the last few days, Maplins electronics, Matalan clothing stores and several national charities have followed – bringing the number of organisations that have suspended or departed the scheme to more than a dozen.

Other major high street chains told the Guardian they would clarify their positions on Wednesday.

The recent pull-outs came despite a three-day offensive by the Work and Pensions secretary, Iain Duncan Smith, the deputy prime minister, Nick Clegg, and employment minister Chris Grayling, who branded critics of the scheme "job snobs" and "modern-day Luddites". Grayling described Right to Work protesters who invaded a Tesco store in Westminster at the weekend as "anti-capitalist extremists".

Clegg told the BBC: "I think anyone who wants to condemn a scheme that helps people into work at a time of high unemployment really needs to think hard about their priorities. It is not slave labour. It is not compulsory. It is entirely voluntary."

Previously Duncan Smith had written in the Daily Mail: "Armed with an unjustified sense of superiority and sporting an intellectual sneer, we find a commentating elite which seems determined to belittle and downgrade any opportunity for young people that doesn't fit their pre-conceived notion of a 'worthwhile job'."

The Tesco announcement means 1,500 unemployed people expected to be referred to the company on work experience over the next six months will now be given a choice of whether to stay on benefits and complete the placement unpaid, or accept a paid placement with a guaranteed offer of a job at the end of it if their trial goes well.

Access to work experience is voluntary, but if someone leaves the scheme without "good reason" after the first week, they can lose two weeks' jobseeker's allowance. A Tesco spokesperson said negotiations with the government had been constructive.

Grayling has said he will look at Tesco's proposals, but is not keen to rush any decision. He insisted no one is forced on to the scheme and use of penalties is limited.

A DWP spokesman welcomed Tesco's offer of paid work. "We have an excellent scheme that we know is making a real difference to the job prospects of young people. Tesco have said that they are continuing to be a part of the government's work experience scheme. What they have also said is that they will be delivering an additional offer to young people that will help more people find permanent employment – that has to be a good thing." Richard Brasher, chief executive of Tesco UK, said: "We know it is difficult for young people to give up benefits for a short-term placement with no permanent job at the end of it. So this guarantee that a job will be available provided the placement is completed satisfactorily should be a major confidence boost for young people wanting to enter work on a permanent basis."

He added: "Tesco committed [to] 3,000 work placements under the government's work experience scheme. To date around 1,500 have been delivered. We will offer the choice of paid work and the jobs guarantee to all of the remaining placements we will deliver under the scheme." He said 300 young people who had done work experience with Tesco had already been given jobs.

Superdrug said: "We take our responsibilities as an employer very seriously … We are supportive of any initiative which is voluntary and where candidates do not lose their benefits if they choose not to participate, and are working closely with ministers to clarify the situation. Until then we will not be taking on any new work experience placements under this scheme."

Argos said: "We are in discussion with the Department for Work and Pensions to ensure the scheme is voluntary, meeting the work experience needs of the individual, and will keep this dialogue going to ensure no one is disadvantaged by working on this programme."

Arcadia said: "BHS took part in a pilot from November 2011 to the end of February this year within their stores in two regions. Out of the people who went through the scheme, 25% have been offered full employment. We currently have no plans to extend the pilot in BHS beyond the end of this month."

After a protest outside Tesco in Leytonstone in north-east London, Ian Pattison, a Youth Fight for Jobs spokesperson, said his group welcomed the company's move "on the proviso that the work experience scheme is voluntary; participants are paid at least the wage of the existing staff with a guaranteed job at the end, and candidates are allowed to join a trade union". "Tesco's withdrawal should be a sign to other companies and the government that we want real jobs not slave labour."