The national living wage is to rise by 6.2% in what the government says is “the biggest cash increase ever”.
The rise is more than four times the rate of inflation and takes hourly pay for people over 25 to £8.72 from April.
Prime Minister Boris Johnson said: “For too long, people haven’t seen the pay rises they deserve.”
But businesses warned that a sharp increase in wages would put pressure on companies and urged the government to reduce costs elsewhere for firms.
Hannah Essex, co-executive director of the British Chambers of Commerce, said that many companies “have struggled with increased costs in a time of great economic uncertainty”.
“Raising wage floors so far above the rate of inflation will pile further pressure on cash flow and eat into training and investment budgets,” she said.
“For this policy to be sustainable, government must offset these costs by reducing others.”
From April 2020, the new rates are: