Homebase has been accused of "vulture" business practices after a leaked internal document appeared to promote the idea of using unpaid jobseekers to keep down company payroll costs.

The DIY retailer confirmed that a photo of more than a dozen unemployed jobseekers from the government's work experience programme, captioned, "Would 750 hours with no payroll costs benefit YOUR store?" was produced by company staff for an internal discussion.

The image of the jobseekers in high-visibility jackets standing in a store next to a manager stated that in February this year, the Haringey branch of Homebase in north London drafted 25 jobseekers from the government's work experience scheme. Those on the scheme work 30 hours a week unpaid for up to eight weeks. The document came to light when it was passed to blogger Tom Pride.

The company, which employs more than 17,000 people and is part of the multibillion Home Retail Group, strenuously denied that the image was a poster or an advert for the scheme.

The image – with the subheading "How the work experience programme can benefit your store" – was produced as part of a larger document, it said, and used in private discussions between neighbouring Homebase store managers.

Recently, the work and pensions minister, Iain Duncan Smith, said those on similar schemes were not unpaid as unemployed people receive upwards of £56.25 a week.

Unite, Britain's largest union, said the Homebase internal document had let "the cat out of the bag," adding that the entire scheme smacked of "state sponsored slavery."

Separate from the Work Programme and mandatory work activity, the work experience scheme became voluntary last year after the government was forced by companies to change the rules.

But jobseekers have told the Guardian they have been threatened with having their benefits sanctioned or sent on mandatory work activity if they did not take part or pulled out.

Campaigning group Boycott Workfare said they were informed by an anonymous source that those in the Haringey branch had been warned they would be sanctioned if they did not take up the offer of the Homebase placements.

Two days before the start of the Easter bank holiday, nearby Finsbury Park jobcentre tweeted that it had successfully placed 21 people in the Haringey store to gain experience. The tweet was later deleted.

Steve Turner, executive director of policy at Unite, said, "This exposure has let the cat out of the bag and shows who is really benefiting out of workfare schemes. The government need to urgently bring an end to this appalling, exploitative practice."

"Homebase make millions of pounds in profit, yet scandalously – like vultures – they are seeking to exploit some of the most vulnerable people in society, by forcing them to work for free at the threat of losing essential financial support."

"Not only is it a problem for the people they are exploiting, but it also drives down the pay and conditions of regular members of staff. It is bad enough that the government let big businesses get away with poverty pay levels, but to actually drive struggling people in to the grips of this kind of exploitation is unforgivable and smacks of state sponsored slavery."

Homebase said those on work experience did not replace paid workers and those on the scheme were free to leave if they wanted.

"We ensure they work alongside, not replace, paid colleagues. They are entirely under no obligation to participate, nor will non-participation affect any benefits."

Homebase said the image did not form "wider company policy" and said it was "part of a document which was prepared for use in a single internal meeting to discuss the programme that had operated in that store".

The retailer added that the document also contained testimonials from those who benefited from the scheme.

Boycott Workfare called for the scheme to be scrapped: "The government can't have it both ways: branding people on benefits as feckless scroungers when thousands of us are working for no wages. If they really wanted to tackle the 'something for nothing' culture they could start by ditching workfare and making companies pay a wage to everyone working in their stores.

"In a week where people claiming benefit have been smeared by the chancellor, the fact of the matter is that it's not people on benefits who are scrounging off the taxpayer, it's businesses."

Commenting on the Homebase image, the Department of Work and Pensions said it had safeguards in place to "ensure people doing work experience are not exploited".

It said: "All employers offering work experience through jobcentre plus sign an agreement that placements must be in addition to existing or planned vacancies and that no current employees are replaced by people doing work experience."