The UK Government's Work Programme was criticised by Oxfam Cymru at the Wales Select Committee inquiry in Westminster this week.
Chris Johnes, director of the charity's UK Poverty Programme, told the committee on Tuesday (March 19) there was clear evidence that some providers operate a 'traffic light' system, only offering training and placements to people most likely to get work.
"People needing intensive support such as those with poor literacy or drug or alcohol problems are classed as 'red' and are deemed to be so far removed from the labour market that the contractor will not invest time or money on them," he said.
"It is totally unacceptable that a programme aimed at getting people into work is not available to those who need it most.
"All people accessing employment support in Wales should receive a comprehensive and seamless service providing them with appropriate training, skills, mentoring and work placements relevant to their needs and regardless of their distance from the labour market."
Mr Johnes said compulsory participation in the UK Work Programme was actively preventing Welsh people from accessing publicly funded training because of the 'double funding' rule, while not providing any training for them itself.
He also accuses programme providers of not acting in the best interests of clients by steering them into jobs irrelevant to their experience.
In case study evidence, community worker Paul Stepczak , who runs a job club in Rhondda Cynon Taff, tells of a man desperate for literacy help to get into work who was offered nothing at all by the Work Programme provider because he was coded 'red' - least likely to gain employment.
"I suspect this is because the company is less likely to get a return on any investment," reported Mr Stepczak.