Department for Work and Pensions confirms that unemployed will not have benefits docked if they leave work placements

All benefit sanctions on the government's work-experience scheme are to be dropped by the Department for Work and Pensions (DWP) following meetings between ministers and employers.

The news was conveyed by Anne Marie Carrie, chief executive of Barnardo's and one of the employers present at the 90-minute meeting between the employment minister, Chris Grayling, and more than 50 firms involved in the scheme.

They had met to seek reassurances that the government was not seeking to force young unemployed people into work-experience schemes.

The government says the scheme is voluntary and gives unemployed people eight weeks' work experience. But participants can lose two weeks' jobseeker's allowance if they leave for no reason after more than a week on the scheme.

There have also been suggestions that some jobcentre staff do not make it clear that participation in the scheme is voluntary.

The removal of the sanction after one week was a key demand of employers, some of whom said they would withdraw from the scheme unless reforms were made.

Grayling claimed the attacks on the scheme, by what the government has described as the "Trotskyist" Right to Work campaign, had led to an increase in employer interest in joining the scheme.

At prime minister's questions, David Cameron said 250 extra firms had shown interest in joining.

Iain Duncan Smith, the work and pensions secretary, said the protesters outside Tesco stores were anarchists and half of them were unemployed.

"The reality for us is that this is a great programme … the kids are getting experience," he said.

Grayling said: "The participants are volunteers, the employers are volunteers. The employers said to us: 'We would like to modify it. At the moment you have a got a situation where people can leave voluntarily after the first week. We would like to be able to sit down later in a work placement if it is not working and say we want to opt out.'

"We thought that was reasonable so we said fine and we will accept that."

He added: "If you look at where we have applied sanctions, it is not about turning up or not turning up, it is about inappropriate behaviour, such as theft in the workplace."

Arguably the rules until now allowed a much wider set of reasons for sanction withdrawal.

Grayling denied he had caved in to the "Trotskyists", saying: "The real argument of the Trotskyist is that unpaid work experience is wrong, and is denying people the right to work; they are wrong."

Critics of Grayling and the DWP will say that they should have acted earlier in order to get rid of any accusation that the scheme amounted to "workfare", since he has been under pressure from employers for more than a week on the issue.

Mark Dunk, from the Right to Work campaign, said: "The dropping of sanctions for the work-experience scam is one battle won but the wider fight goes on. Forced unpaid work still continues in the form of the mandatory work activity and community activity programme. We demand that the government immediately drops not just one of its forced labour schemes [but] all of them.

"There should not be any young person anywhere forced to work for no pay. Everyone on any training scheme should receive minimum wage or above. We demand real jobs now for all."

Brendan Barber, the Trades Union Congress general secretary, said: "We welcome the government's climbdown on the use of sanctions in work experience.

"Proper work experience can be useful and helpful for many young people but it needs to be designed to help the young person, not provide free labour for employers or displace paid staff. Making absolutely clear that it is voluntary at all times will help safeguard against abuse.

"But while voluntary work experience has a role, it is no substitute for real action on youth unemployment, and it is still far from clear whether the government's scheme is helping young people to get paid work.

But Katja Hall, the Confederation of British Industry's chief policy director, disagreed: "It's good to hear that many more employers are signing up to give young people a chance to get experience of work.

"Gaining hands-on experience of the workplace is vital to giving young jobseekers a foot in the door, and it can make such a difference when they are applying for interviews. The advantage of this scheme is that they gain work experience while remaining on benefits.

"The work-experience scheme's record of getting people into jobs is very strong, with more than half coming off benefits after 13 weeks of starting a placement."

John Longworth, director general of the British Chambers of Commerce, said: "Short work-experience placements are a critical part of the journey into employment for thousands of young people every year. We're talking about a system that many jobseekers and small and medium-sized companies rely on.

"The biggest sanction anyone could face is losing the opportunity to gain experience in the world of work, and this announcement will ensure businesses continue to have the confidence to offer these opportunities."