An examination of the transition of armed forces employees from the military to civilian life found employers were confused by their experience and qualifications.
Service leavers also reported finding it hard to explain their skills and experiences to employers.
The Veterans’ Transition Review, led by Conservative peer Lord Michael Ashcroft, suggested employers from small and medium-sized businesses were likely to be among those with the least understanding of service leavers’ abilities.
According to a survey included in the report, 91% of the British public believe it is common for personnel to leave the armed forces with a physical, mental or emotional problem – a belief the report said employers would share.
Service leavers told researchers employers assumed they would be aggressive, institutionalised, incapable of thinking for themselves and unable to adapt to a civilian workplace.
One recent service leaver told a focus group: “I was a warrant officer but all the questions in my interview were about how I would deal with conflict because they thought I was bound to blow a fuse.
“I managed 40 engineers in a submarine with a nuclear reactor, and they said they didn’t think I would be able to manage a department.”
Another described how recruiters made assumptions and discriminated against service people.
“I was on a course and an NGO was presenting,” said a serving soldier. “An army engineer asked a question: ‘I’m looking at leaving, I’m skilled in petroleum and I’d like to work for your type of organisation. Do you recruit military?’ And she said: ‘No, we like people who can think independently.’”
Lord Ashcroft recommended the Ministry of Defence and the armed forces should be more proactive in changing perceptions of service leavers.
He suggested the creation of a new work placement scheme in partnership with industry, to give service leavers practical experience of civilian work.
“As well as doing a superb job of protecting our freedom around the world, the armed forces are perhaps the biggest and best training and apprenticeship scheme we have, and a remarkable engine of social mobility,” said Lord Ashcroft.
“Not surprisingly, most of those leaving the forces go on to do well in civilian life. The great majority find work quickly, and contrary to popular belief, service leavers as a whole are no more likely to have serious problems than the general population.
“Nevertheless, some do struggle with the transition or find it harder than they should to achieve their full potential in the civilian world.
“I hope the straightforward, practical proposals in my review will help achieve a smoother and more successful transition for more of our service leavers, change perceptions of service personnel and veterans, and ensure the country is better prepared to make the most of the extraordinary resource this group of people represents.”
Charity Walking With The Wounded co-founder Ed Parker backed the report’s recommendations.
“We wholeheartedly agree that veterans leaving the armed forces - whether wounded or not - are some of the best trained men and women in this country and more needs to be done to help them find new employment upon leaving the armed forces,” he said.
“Through funds raised by Walking With The Wounded, we work to finance new qualifications, courses and further education for those who have been injured during service.”
Minister for defence personnel, welfare and veterans Anna Soubry said the Government would work with employers and local authorities to improve service leavers’ career prospects.