Sharon Shoesmith's lengthy legal fight against her sacking could leave taxpayers facing a hefty bill, campaigners warned.
A leading employment lawyer said the former director of children's services at Haringey Council in north London could now receive as much as £1 million in compensation.
But trade union Unison hailed Ms Shoesmith's Court of Appeal victory as a "much-needed boost" to social workers around the country.
With the Department for Education and Haringey Council both announcing that they intend to challenge the ruling in the Supreme Court, the highest court in the land, the already large legal costs in the case are set to mount further.
Emma Boon, campaign director of The TaxPayers' Alliance, said: "Sharon Shoesmith presided over a catastrophically dysfunctional organisation that ultimately played a part in the tragic death of Peter Connelly.
"Her department let down that child and she needed to be dismissed as director of children's services given that egregious failure.
"It would be extremely worrying if the incompetence of ministers and authorities responsible have left taxpayers with a big legal bill."
Former children's secretary Ed Balls was criticised in the Court of Appeal judgment for the way he summarily removed Ms Shoesmith from her post without giving her the chance to put her case.
Philip Henson, head of employment at City law firm Bargate Murray, said: "I am sure that Mr Balls will now realise that firing Ms Shoesmith live at a televised press conference back in 2008 was not such an erudite idea after all.
"Ms Shoesmith's case has a wider lesson for all employers of the need to ensure that they carry out a fair investigation and procedure, affording staff the opportunity to put their case forward, rather than pandering to public and media pressure and making a knee-jerk decision to fire members of staff.
"Although the Court of Appeal judges did not make a ruling on compensation, instead referring the case back to the High Court for 'further consideration', Ms Shoesmith is likely to receive compensation approaching, or hitting, the £1 million mark, taking into consideration reinstatement of her pension rights."
Unison general secretary Dave Prentis said: "This ruling will give a much-needed boost to social workers up and down the country who protect daily thousands of vulnerable children and adults.
"It should serve as a lesson that whipping up a campaign of vilification and hatred will never save a single child's life."
He added: "We as a society must accept that, if we are to place such enormous burdens on social workers and other child protection professionals, we must support them and make sure they have adequate resources.
"Social work teams continue to operate with high turnover, high vacancy rates and high caseloads. And the situation is unlikely to improve in the foreseeable future with local authorities facing huge funding cuts."
Regulator Ofsted, which produced the damning report into Haringey Council's children's services which led to Ms Shoesmith's sacking, welcomed the Court of Appeal's ruling in its favour.
Ofsted chief inspector Christine Gilbert said: "I am pleased that Ofsted has comprehensively won this case and that the original judicial review judgment in our favour has been upheld in every aspect on appeal.
"Ofsted carried out a robust inspection and came to a sound conclusion based on evidence. On any view, our inspection report was extremely critical and there has been no challenge to the finding that services for children in Haringey were inadequate.
"The fairness of our process and rigour of our inspection has now been confirmed through the scrutiny of not just one, but two court hearings."
Lynne Featherstone, the Lib Dem MP for Hornsey and Wood Green in Haringey, said Ms Shoesmith was by law responsible for failings in her department relating to the death of Baby P, now named as Peter Connelly.
Richard Wilson, leader of the Lib Dem opposition on Haringey Council, said: "The Children's Act 2004 clearly sets out lines of responsibility for failures to protect children. This was to ensure that never again could bucks be passed.
"People in Haringey and up and down the country, who saw how Haringey Council failed to protect Baby Peter, will find it hard to fathom how the council managed not to follow correct procedure.
"This is another blow in the process of restoring confidence and competence in Haringey's children's services."
Claude Knights, director of children's charity Kidscape, said: "It must never be forgotten that at the centre of these legal altercations lies a child who died in appalling circumstances, and who was failed by a large number of agencies.
"Sadly safeguarding systems in too many regions continue to reveal flaws that leave vulnerable children at risk of grave harm.
"This should never have been about scapegoats and witch hunts, but about ensuring that the individuals who lead our vital children's services can deliver the recommendations set out in every public inquiry report published since and before the tragic case of Victoria Climbie."