The benefits system is too complicated and there are too many incentives for claimants to stay on benefits long term, a think tank has said.
The proposals would help people find work quicker, it is claimed
The Institute for Public Policy Research (IPPR), which has close links to the government, says benefits should be streamlined into a single allowance.
Setting up a flat-rate system could cost up to £1bn but the IPPR says it would save money in the long term.
The government said it was working to put simplicity at the core of policy.
In its report, the IPPR called on the government to scrap jobseeker's allowance, incapacity benefit, income support and carer's allowance.
It said the complexity of the existing system caused difficulties for both claimants and officials.
It also said there were significant financial incentives for people to move onto long-term benefits like income support which gives them more money than jobseeker's allowance.
Under its proposals, the present array of benefits would be replaced by one, flat-rate allowance.
Instead of being labelled "disabled", "lone parent" or "unemployed", a claimant's entitlement would be based on their out-of-work status.
Individual circumstances would still determine their package of support and the benefit would come with conditions, the report said.
The proposed system would guarantee anybody of working age out of a job would get a basic income for 12 weeks, without a medical assessment or means test.
After 12 weeks, by which time most jobseeker's allowance claimants have moved off benefits, the IPPR proposes a means-test.
Kate Stanley, head of social policy at the IPPR, said: "The benefits system Peter Hain has inherited is too complex to be effective."
She added the proposed system would allow people to start the process of getting back into work more quickly.
The Department for Work and Pensions acknowledged that the benefits system could be complicated.
"The DWP must strike the right balance between a system that is simple and one that addresses the specific needs of the individuals who rely on it," a spokesman said.
"However, we recognise that the system can be complicated and have established a dedicated benefit simplification unit to ensure simplicity is core to future policy and to improve the current system."
The spokesman said that the Welfare Reform Act had introduced two new benefits, both much simpler than their predecessors, and added that pensions were being made simpler.
New Work and Pensions Secretary Peter Hain is expected to announce welfare reforms next week.