Around five million workers could claim additional holiday pay for working overtime following a groundbreaking employment appeal tribunal.
Currently, only basic pay counts when calculating holiday pay.
The ruling could yet be appealed, meaning a final decision may be years away, and details of whether claims can be backdated have yet to be released.
However, some estimate that businesses could lose billions of pounds if claims can be backdated.
The ruling has been criticised by the chamber of commerce for Nottinghamshire.
Chris Hobson, Head of Information and Representation at the Chamber, said: "Today's tribunal rulings are highly damaging and could have huge financial and administrative implications for many businesses across the East Midlands, which could lead to business failures and job losses.
"It's neither right nor fair to hit businesses, which have done everything they can to comply with the law, with the prospect of underpayment claims backdated as far as 1998.
"The economy is starting to show signs of real growth following its recovery from recession and many companies are working to reverse pay cuts and invest in their employees. Having to face huge and unforeseen pay claims could severely hamper their growth prospects.
"These rulings should be challenged to limit any retrospective liability that firms may face, so it's good to see that the Government has already established a taskforce to look at the potential implications and limit their impact on business."
Howard Beckett of Unite union, said: "Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to. This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order.
"Employers will now have to include overtime in calculating holiday pay, and those that don't should be under no illusion that Unite will fight to ensure that our members receive their full entitlement."
John Cridland, CBI Director-General, said: "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.
"These cases are creating major uncertainty for businesses and impacting on investment and resourcing decisions.
"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."
