Six years ago, after seven years in the forces, I left the RAF to train as a lawyer. Like many others, I'm still on the National Reserve List and have informed my firm that I could face recall. However, many people in a similar position may not have told their employers, nor realise their need to do so.

There are currently 46,000 volunteer reserves, territorials and ex-service personnel on the Ministry of Defence call-out list. More than half of those on the list are in full-time employment and 15 per cent are employed by professional service firms in the UK. Firms should therefore brace themselves for the hidden impact of the Iraqi conflict – the possible loss of key personnel recalled to the armed forces.

The Reserve Forces Act 1996 was introduced to deal with the circumstances in which reservists can be called into full-time military service and provides regulation to deal with exemptions and financial compensations.

However, for many employers and employees a great deal of uncertainty still remains, particularly where the employment contract subsists throughout the period of military service, or ends on call-up and is revived on reinstatement.

Many employers are unaware that when a call-up notice has been issued, they have a legal obligation to release volunteer reserves for military service. If they fail to comply, employers are in effect inducing the reservist to desert, which is a criminal offence. Similarly, a reservist who fails to comply is guilty of desertion under Section 96 of the 1996 act.

There is no legal obligation on former service personnel to notify their employers that they could be called up in the near future. Ex-service personnel can be on the reserve list for a significant length of time and may have had a number of jobs since they left the forces. This means an employer may be completely in the dark about the risks of some of their employees being called up.

Additionally, because of the nature of the legislation, the Reserve Forces Act does not provide a statutory time frame to allow employers to make alternative arrangements before they lose their reservist, although it is usual to give at least two weeks notice. Consequently, it is vital that firms take immediate steps to find out if any of their employees could find themselves back in uniform, and prepare a contingency strategy to ensure that their businesses will still be capable of operating effectively.

Call-out notices can be appealed against, but the company would need to establish a strong commercial argument that it would be seriously disadvantaged by the employee's absence. Employees have a similar right to apply for deferral or revocation of call-out for specific reasons, such as sole care of a child or disabled person, or harm to a family-owned business.

For the employer, further questions arise as to whether reservists are entitled to the benefit of any bonuses or profit-share dividends awarded in their absence and similarly whether holidays accrue during military service. Essentially firms which do not have a firmwide policy on the matter would be well advised to agree in advance with a reservist as to how their contract will be treated in their absence.

The good news for employers is that they do not have to pay reservists when they are away. Employees are paid by the Ministry of Defence for the duration of any call-out. Firms may also be able to claim the Employer's Standard Award – a lump sum payment that is designed to cover the cost of recruiting and training a replacement.

And there is good news for the reservist, as their employment status is protected after demobilisation, no matter how long the service has lasted. The Reserve Forces (Safeguard of Employment) Act 1985 deals with the employment rights of reservists, granting them a right to apply for their old jobs after call-up and protecting them from pre-emptive dismissal before call-up. Even if the job the employee left has changed, the employer must offer “alternative employment on the most favourable terms and conditions, which are reasonable and practicable”.