The national minimum wage will increase by 3% to £6.70 an hour from October 2015.
The increase is equivalent to an additional 20p an hour for workers aged 21 and over, from its current rate of £6.50 an hour
This will be the largest increase to the national minimum wage in real-terms since 2008.
Sign up to our newsletters
Receive news and guidance on a range of HR issues direct to your inbox
The government has also announced that the national minimum wage for apprentices will increase by 20% (57p) an hour to £3.30 from its current rate of £2.73 an hour. This is the largest ever increase in the national minimum wage for apprentices.
The hourly rate for 16-to-17 year-olds will also increased by 2% (8p an hour) to £3.87 from £3.79, while the rate for 18-to-20 year-olds will rise by 3% (17p) from £5.13 to £5.30 per hour.
Prime minister David Cameron (pictured) said: “At the heart of our long-term economic plan for Britain is a simple idea: that those who put in, should get out; that hard work is really rewarded; and that the benefits of recovery are truly national.
“The announcement will mean more financial security for Britain’s families and a better future for our country.
Deputy prime minister Nick Clegg added: “This is just one of the many ways in which we’ve created a fairer society, while building a stronger economy.
“Whether you’re on low pay or starting your dream career through an apprenticeship, you will get more support to help you go further and faster.”
The Low Pay Commission has welcomed the government’s acceptance of its recommendations on rates for the national minimum wage.
David Norgrove, chair of the Low Pay Commission, said: “We judge that the improved economic and labour market conditions mean, once again, that employers will be able to respond in a way that supports employment.”