People seeking to move from welfare to employment were being seriously hindered by the rules, according to the Irish National Organisation of the Unemployed (INOU).
The group said they were particularly concerned at the adverse effect the €317 threshold for the retention of secondary benefits is having on unemployed people.
This threshold, set by Department of Social and Family Affairs, has remained unchanged since 1994 and is causing unnecessary unemployment traps for people wishing to move from welfare to work.
"Anyone taking up a position on a Jobs Initiative scheme is in excess of this threshold by as little as 0.97 cent and as a result will lose their rent supplement, etcetera," said Ms June Tinsley, INOU's policy officer.
"The same situation applies to lone parents on the Community Employment programme."
Both Jobs Initiative and Community Employment have proved to be valuable in assisting participants to enter or re-enter the labour market, she added.
However, participants who benefit from these schemes are now less likely to participate as it could result in their income becoming unsustainable.
The Labour Party Spokesperson on Social and Family Affairs, Mr Willie Penrose, supported the complaint.
"It is shameful and disgraceful that lone parents who take up a community employment scheme are disqualified from receiving rent allowance once their gross income exceeds €317.43."
"This rule acts as a complete disincentive to lone parents to seek out work or training within the community," Mr Penrose added.