Casual workers are to be entitled to four weeks paid holiday a year, after a European court ruled Britain was breaking employment law under its current system.
The European Court of Justice made the ruling, which could cause problems for licensees and add to their red tape burden, after it decided the UK Government had broken European employment law by denying freelancers and those workers on short term contracts, the right to paid holiday.
British laws which stated that only those working for an employer for more than 13 weeks were entitled to holiday pay, will now have to be scrapped.
The change will affect an estimated 500,000 workers, the majority of which work in pubs, hotels, tourism and catering, but will not apply to the self-employed.
The British Chamber of Commerce (BCC) and the Confederation of British Industry have expressed disappointment at the new ruling.
A spokesman for the BCC said with the recent extension of maternity leave and the introduction of paternity leave, more businesses would be forced to employ relief managers to cover those absences.
But the new ruling means those cover staff would now have to be given paid leave themselves.
"Businesses will now find themselves in the ridiculous situation of paying for a short term contract worker for one top two months to cover for a working parent and having to find temporary staff to cover the short term contract worker, who could be due one to three days leave," the BCC said in a statement.
The test case was brought by the broadcasting and entertainment union Bectu and was the first time an individual union had taken the Government to the European court. It is now pushing for an immediate change to British law.
Bectu's secretary general Roger Bolton, said: "The Government should act now to change the law rather than wait to be forced by British courts. Our workers, along with millions of other workers, have been treated as second-class citizens by the Government's decision to exclude them from the same holiday rights that other employees enjoy."