Firms are going to be stopped from including bank holidays in the annual leave entitlement of staff.
At present, it is legal for firms to deduct up to eight bank holidays from their staff's annual leave entitlement.
From October it will be legal to only deduct four bank holiday days, and by April 2009 the right to deduct will be removed altogether.
At present, an estimated six million employees have bank holidays deducted from annual leave.
"This extra time-off will make a real difference in the lives of hard-working people - a proper rest from work and more time to spend with their families and friends," said Jim Fitzpatrick, Employment Relations Minister.
"Businesses will benefit too - from reduced absenteeism and a workforce who are more motivated and productive," he added.
Brendan Barber, general secretary of the TUC, described the government's move as an "important milestone".
The Confederation of British Industry (CBI) welcomed the government's decision to phase in the extension to annual leave.
"Many businesses - particularly retailers and health and social care providers will welcome the government's decision to extend the phasing in period as it will help them change shift patterns and absorb transition costs," John Cridland, CBI deputy director general said.
Legally, most full-time staff are entitled to four weeks paid holiday a year.
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