Companies will be given £5,600 each time they get an ex-prisoner into work and keep them on for more than two years, the government has announced.
Ministers are promising that those who are released from jails in England, Scotland and Wales and move on to jobseeker's allowance will be placed straight on to the Work Programme.
They say this will provide specialist help to make them more employable and reduce reoffending.
Ex-inmates have high joblessness rates.
Under the government's plans, benefit claims will be processed while prisoners are in jail so they will immediately join the Work Programme - designed for the long-term unemployed or those deemed most at-risk of becoming so - if they claim jobseeker's allowance when released.
Firms will be able to start providing support and guidance about employment opportunities towards the end of inmates' sentences.
Employment minister Chris Grayling said: "Getting former offenders into work is absolutely crucial to tackling our crime challenge. The rate of reoffending in Britain is far too high and we have to reduce it.
"In the past we just sent people out on to the same streets where they offended in the first place with virtually no money and very little support. We're now working to change that."
Official figures for England and Wales showed that half of ex-offenders were on out-of-work benefits two years after being released from prison in 2008.
Prisons minister Crispin Blunt said: "Getting ex-prisoners into work at the earliest opportunity will help them stop reoffending.
"Referring offenders to the Work Programme straight from custody will ensure that they get help and support to find work as they leave custody, when they are currently most likely to start reoffending."
Meanwhile, a report warns that prison overcrowding is undermining the rehabilitation of criminals and risks increasing reoffending.
The Criminal Justice Alliance, which represents 64 organisations, called for the government to urgently limit "the unnecessary use of prison", ensuring it was reserved for "serious, persistent and violent offenders for whom no alternative sanction is appropriate".
It comes after Chief Inspector of Prisons Nick Hardwick said the rising pressure on prisons from budget cuts and increasing numbers could not go on indefinitely.
The prison population in England and Wales hit 87,787 last week, down slightly on the all-time high of 88,179 set last December.
A proposal that is sure to cause some debate I suspect.