Nearly a quarter of firms have had to sack an employee they have recently taken on due to poor reference checking, a new survey reveals.Research from Bank of Scotland Business Banking shows that 23% of small firms have fired a new recruit during the last five years.

Furthermore, over half of firms employing 10 or more people said they have had to let someone go. Incompetence was the top reason, followed by gross misconduct and theft.

The report stressed that managerial incompetence, however, is contributing to the cycle.

Up to 53% of small business owner-managers surveyed admitted they fail to check references before offering a job to a candidate. Older bosses are more prone to such tactics, the report found.

By and large, most firms rely on word of mouth and personal recommendation when they are trying to fill a vacancy.

"With more than half of small businesses with over 10 staff having had to dismiss a new recruit, largely because of that persons incompetence, reference checks should be the last part of the hiring process left to chance," said Kevin Gillett, head of Bank of Scotland Business Banking.

The study also suggests many bosses become complacent and tolerate unqualified staff. Over half said they have regrets about someone they have hired in the past five years.

Two-fifths said they regret hiring one or two people in their firm, while 7% of bosses said they regret hiring over half of the people they have employed.