Workers have won a ground-breaking case at the Employment Appeal Tribunal to include overtime in holiday pay.
This means all people working overtime could claim for additional holiday pay. Currently, only basic pay counts when calculating holiday pay.
The tribunal also ruled that workers can make backdated claims for a particular three-month period.
However, the ruling could be referred to the Court of Appeal, meaning a final decision may be years away.
"Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to," said Howard Beckett of the Unite union.
"This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order."
'Matter of urgency'The appeal tribunal ruled on three cases - Bear Scotland versus Fulton, Amec vs Law and Hertel vs Wood - where employees had won their original claims against their employers.
The ruling has widespread implications for all companies paying overtime to their staff.
The government estimates that one-sixth of the 30.8 million people in work get paid overtime. This means around five million workers could be entitled to more holiday pay.
The coalition and business groups had argued strongly that overtime should not be included in holiday pay calculations.
After the ruling, Business Secretary Vince Cable said he would be setting up a task force to assess the impact of the ruling.
"Government will review the judgment in detail as a matter of urgency," he said.
"To properly understand the financial exposure employers face, we have set up a task force of representatives from government and business to discuss how we can limit the impact on business."
Financial implicationsBusiness leaders were more forthright.
"This is a real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds - and not all will survive, which could mean significant job losses," said CBI director general John Cridland.
"This judgment must be challenged. We need the UK government to step up its defence of the current UK law, and use its powers to limit any retrospective liability that firms may face."
Case study: Shane Brown, Leicester
"I work 35 hours a week as a cleaner but am only contracted to 28 hours.
"Being on near enough minimum wage is bad enough, but to have to push to get one extra day to make ends meet makes life at work very stressful.
It also makes me less likely to want to take a holiday because no matter what I say or do, I'll be losing out. I can't afford to only be paid for 28 hours for even one week in a month.
It currently has a massive knock-on effect that means I have to make a choice between eating properly (and by properly, I mean one meal a day as it's all I can realistically afford) or not eating for a couple of days that week just to be able to have some simple pleasure in life.
Being paid holiday for overtime worked would be extremely useful. It would take a massive weight off my shoulders so if I was to take a holiday, I wouldn't be constantly worrying about how I'm going to make ends meet while I'm off work and I would actually be able to relax."
Given the financial implications for companies, lawyers suggested an appeal was likely.
"The potential financial implications for many employers will be significant," said Jean Lovett, employment and incentives partner at the law firm Linklaters.
"We envisage that the tribunal's decision will not be the last word on this issue. As significant sums are involved, we expect the decision to be appealed."
"Due to the costs involved many employers may now look to reduce the availability of overtime, where feasible."
The cases centre on the interpretation of the EU-wide Working Time Directive, and in particular the Working Time Regulations implemented in the UK in 1998.
The tribunal ruling suggests that UK companies have been interpreting the EU directive wrongly.
Do you work overtime? Are you an employer? Will the holiday pay ruling have an impact on you? You can share your experience by emailing haveyoursay@bbc.co.uk
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