Rare Recruitment, a company that admitted to catering for graduates from a "visibly non-white background", has been accused of positive discrimination, and it's not the only organisation to be making headlines for potentially breaking the law. Gloucestershire Police Force has been criticised by a number of white candidates for apparently deselecting them on race grounds, and neighbouring Avon and Somerset Police has been accused of rejecting 186 white males out of nearly 800 applicants last year.

The civil liberties group Liberty and Law reported Rare Recruitment to the Commission for Racial Equality (CRE), as well as reporting Gloucestershire constabulary to both the CRE and the Equal Opportunities Commission (EOC). "Under the Race Relations Act and the Sex Discrimination Act, shortlisting or appointing on racial or gender grounds is unlawful," points out Gerald Hartup, the Commission's director.

Having realised its error, Rare immediately declared that it was "open to all", but that it specialised in ethnic minority candidates. "We were not suggesting that someone should be taken on because of their ethnic background. What we were trying to do is address the fact that people from ethnic minority backgrounds have a great deal more trouble getting interviews than anyone else. Our aim was simply to introduce very talented people and then let the recruitment process decide on the best person," explains David Bell, director for people at publishing giant Pearson and unpaid chair of Rare's advisory board.

Meanwhile, police forces accused of positive discrimination are often quick to point out that they are obliged by law to bring the ethnic breakdown of their officers into line with that of the community they serve.

Mr Hartup sympathises, saying it's not surprising some public sector organisations - which face tough government targets on the number of ethnic minorities they take on - wind up crossing the line into positive discrimination. "Take the 25 per cent target that the Metropolitan Police has been set. They were ludicrous targets - impossible to fill. The police said so and everybody knew it. The problem with this is that if you set up targets for people to fail, there is enormous pressure on people to break the law. In some cases, their job and their bonuses may depend on it," he says.

Dianah Worman, adviser on diversity at the Chartered Institute of Personnel and Development (CIPD), adds that the example of Rare Recruitment shows how easy it is to reach the cut-off point for breaching the Act in the private sector too. "It's a fine line to cross, within the technicality of the law," she says.

So how can employers be expected to stay on the right side of the law? After all, there aren't just concerns about ethnic minorities having a particularly hard time finding work and gaining promotion. There are similar alarm bells ringing around the rate at which women are getting left behind. Recent research from the Equal Opportunities Commission (EOC) found that it would take 40 years, based on present trends, for the number of women to equal that of men at director level in FTSE100 companies.

This week, Tony Blair said a "massive amount of work" remains to be done to close the pay gap between men and women, after a report by the Women and Work Commission found that women in full-time work were earning 17 per cent less than men.

Worman rejects the idea that positive discrimination would be a speedy way of solving the problem. "Quick fixes don't work. You can't undo something overnight that has been entrenched for a very long time, not least because the whole workforce will resent it. Nobody wants to think they've been taken on or promoted simply because of their gender or ethnicity, and the rest of the workforce will become aggrieved too."

Worman believes the golden rule for employers is to show that they are interested in everyone, but that they'd like more people from certain groups to apply. The Commission for Racial Equality agrees. "Positive action can be used up until the point of application. From then on, applicants should be selected on their ability to do the job," says a spokesperson.

Joy Ward, diversity adviser at B&Q, which is renowned for its diverse workforce, says, "Targeted advertising helps us widen our net when it comes to attracting different kinds of people. But nobody gets preferential treatment once they've applied."

Meanwhile, Andrew Wakelin, senior manager of equality and diversity at Lloyds TSB, says, "By simply selling a career in banking to a wider group of people, we've managed to increase the percentage of ethnic minorities in our graduate intake from three per cent to 20-25 per cent."

Sarah Churchman, head of diversity at PricewaterhouseCoopers, believes that in a competitive market, positive discrimination is completely irrational. "It makes commercial sense to create an environment where meritocracy prevails. Anything other than that is demotivating for everyone and productivity will inevitably drop."

But this should not be an invitation to ignore the diversity issue, she says. "Addressing diversity is important because even where there is no blatant discrimination going on, there are often subtle forms of discrimination going on beneath the surface.

"The other important thing to do as part of positive action is to create a level playing field. To do this, I believe you need to focus on certain minority groups to enable them to do well in an environment that may not be as sympathetic to them as others. This also takes time."

Churchman provides targeted development as an example. "A lot of organisations, including my own, focus on helping women become more self-confident, have greater impact and stronger influential skills. Building networks can be another powerful force of change - whether for women or ethnic minorities. Bringing people together gives them access to senior role models and helps the organisation itself understand the specific issues facing these groups. Mentoring programmes can also help people develop the right skills."

Sometimes it takes a shift in emphasis of the whole application process to create a level playing field, as Sally Milne, head of resourcing and diversity at ITV, has learned. "Our trainee scheme, which is designed to bring in the best talent to our newsrooms, wasn't attracting enough diversity. So we designed a whole new bias-free application form, where we focused less on what university people went to and what experience they have of journalism, and more on their journalistic appetite and competencies. This certainly beats positive discrimination, which would wind up disengaging our community."

Even the EOC, despite its survey findings, thinks that positive action is more effective than positive discrimination. But Jenny Watson, the Commission's chair, believes individual employers could be doing more to create equality. She calls for a legal requirement for employers in the private sector to promote sex equality and eliminate sex discrimination - starting with things like identifying and addressing pay gaps. She believes forthcoming legislation in the public sector could set a precedent.

Meanwhile, the Confederation of British Industry (CBI) believes neither positive action by individual companies, nor positive discrimination, can totally solve the problem of inequalities. "The problem sets in much earlier, and stems from things like poor education, poor career advice, and low expectations," says Mariska van der Linden, the CBI's senior policy adviser. "Those are the issues that really need addressing."