Unpaid jobseekers have been forced to clean private homes and offices for more than a month at a time under government employment schemes, despite mounting evidence that the controversial policy is reducing the overall availability of paid work by replacing temporary jobs and overtime for other staff.

A succession of high street shops have pulled out of the schemes this week amid criticism that using unpaid labour to carry out routine tasks such as filling shelves amounts to a public subsidy for employers, but the practice extends far beyond the retail industry.

The Guardian has now discovered through a freedom of information request that a major government contractor, Avanta, has compelled jobseekers to work as unpaid cleaners in houses, flats, offices and council premises under the work programme.

The Department for Work and Pensions (DWP) has previously stated that all mandatory schemes must be for "community benefit". However, under government rules, this can be defined as increasing the profit of organisations where the unemployed are sent to work without pay.

Avanta has said that its schemes are not mandatory, but like all back-to-work companies involved in the work programme, it is able to refer jobseekers back to the job centre for sanctions.

Rebecca Fagan, a manager at DC Property Maintenance in Sussex, said that it had been sent "loads" of jobseekers from Avanta during the last two years. "They normally come for four weeks and they are put with other team members," she said.

The unpaid work involves cleaning houses and flats in the Sussex area as well as offices. When asked if they were job shadowing, she replied that "they are actually doing" cleaning.

Over the last two years she said that she had had 20-25 unpaid cleaners through the work programme and the previous new deal scheme. According to Fagan, the firm, which employs 18 full-time staff including those in head office, had hired six or seven during those two years.

"It gets them back into work," she said. She added that the firm had been passed four to five jobseekers in the last six months alone, usually for four weeks at a time. "Sometimes we ask the job centre or local scheme if they want to extend that four weeks if we think we really want to employ them but it is not the right time." She confirmed that even when the placements were extended they were still not paid.

"We find it the best way to see how people work when on jobs," she said. "Most of them, you find that they are eager to get back into the workplace. They are really trying to get back into a job. Some, you can tell they are doing it for the sake of keeping their benefits."

She added that her other staff were happy and did not believe it was replacing other shifts.

[This update was inserted on 29 February 2012:] A second company, Town and Country Cleaners, was also listed on the freedom of information document as an Avanta placement provider in the Kent-Sussex area. However, director David Rushton stated unequivocally: "Town & Country Cleaners do not use unpaid cleaners supplied by Avanta or anyone else."

Following publication of the Guardian article the company checked its records and found, he said, that "we have only used the [Avanta placement] service once for one individual who came to work in our customer service department, an office based position, from 25 July to 12 August last year". [See footnote]

Responding to questions about why it was sending jobseekers to get work experience as cleaners, Avanta said: "Our approach is to work closely with our customers to understand the type of job that they are looking for and create a personalised package of support that will enable them to get a job with long-term prospects … We provide a broad range of placements with employers from different business sectors.

"We work with many employers who have recruited staff following work experience placements and we believe that work experience is a vital tool in helping long-term unemployed people find work."

Nonetheless, evidence sent to a government committee suggests some employers have been replacing temporary staff and taking away overtime hours.

Minutes from the social security advisory committee, an official and impartial body set up to advise the DWP on welfare policy, suggest evidence had already surfaced by December that employers were using unpaid schemes to fill seasonal vacancies.

"Many retail jobs required staff to work for 16 hours each week, with overtime payable for any hours worked beyond that. Work experience allowed for 25 hours work activity, so overtime to permanent staff was being reduced or removed," the minutes noted. "There was also evidence to suggest that work experience placements were being taken on to cover Christmas vacancies."

A DWP official told the committee that Jobcentre Plus required employers to sign a declaration confirming no jobs would be displaced through participation in the work experience scheme, but said the department was "working with other stakeholders to explore what more it could do to protect against that".

More than 34,000 young people have started unpaid job placements of up to eight weeks under the work experience programme. The scheme is voluntary, but anyone terminating their placement early can face sanctions, including a stop on their benefits for between two and 26 weeks.

The committee's chair, Paul Gray, ended the session by asking the DWP to take further action to prevent work experience roles taking over paid jobs: "He said that the committee had voiced some serious concerns around the potential for exploitation of the work experience scheme and considered it important for the department to look at how it can further strengthen the safeguards that had been put in place," the official minutes note.

The same committee had also, earlier in 2011, warned the government against proceeding with another scheme introducing compulsory work placements for some jobseekers. The government proceeded with the mandatory work activity programme regardless, saying it expected no more than around 10,000 jobseekers a year to be compelled to do work placements under the programme. The latest figures record 8,100 people were placed on to the scheme in November 2011 alone.

Poundland became the latest employer to pull out or amend its participation in the government's work schemes on Friday, when it issued a statement stating it was suspending "participation in the government's mandatory work programme" but continuing to take people on voluntary work experience.

It later clarified that it was pulling out of the work programme, a government scheme administered by private companies, owing to concerns about whether places were voluntary.

"Poundland have been taking part in two schemes, the work programme and the work experience scheme," it said in a statement. "Poundland has suspended its participation in the work programme, because of concerns about the compulsory nature of the programme but they are continuing with the work experience, which is voluntary."

Several other companies, including Waterstones, Sainsbury's and TK Maxx, have withdrawn from the work experience scheme, while Tesco now offers jobseekers the choice of sticking with the government programme or taking up paid work with a guarantee of a staff job at the end of a four-week placement if the trial was successful.

As Poundland withdraw from the Work Programme scheme citing compulsory placements as a cause for concern, the Guardian has uncovered more evidence about the behaviour of the companies administering scheme.

Earlier this week the Guardian reported that A4E, one of the biggest provider of the scheme, had compelled jobseekers to work unpaid in its own offices, as the police launched an official investigation into allegations of fraudulent business practices at the company. A4E's founder, Emma Harrison, has subsequently stepped down as David Cameron's "families tsar" and from the board of A4E.

The chair of the Social Security Advisory Committee declined to comment.

• This article was amended on 29 February 2012 because the original said: "Town and Country Cleaners confirmed it also used unpaid cleaners sent by Avanta, but could not provide further details." The company later contacted the Guardian and stated unequivocally that it had used no unpaid Avanta cleaners. (A director said that information initially given to the Guardian came from an employee who had no access to information about such work placements.)