The national minimum wage is to increase by 20p an hour to £6.70, the biggest real-terms rise in seven years, the government has announced.
More than 1.4 million low paid workers will benefit from the 3% hike, while rates for younger workers and apprentices will also go up - all from October.
The hourly rate for 18 to 20-year-olds will go up from £5.13 to £5.30 (3%) and by 8p to £3.87 for 16 and 17-year-olds (2%).
The statutory minimum for apprentices will jump by 57p to £3.30, an increase of 20% - the biggest ever rise.
The rates were recommended by the Low Pay Commission, although the government is going further than the suggested figure of £2.80 for apprentices.
Prime Minister David Cameron 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, that the benefits of recovery are truly national.
Deputy Prime Minister Nick Clegg added: "This is just one of the many ways in which we've created a fairer society whilst building a stronger economy. If you work hard, this government is behind you all the way.
"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."
Business Secretary Vince Cable is planning to launch a national minimum wage accelerator - an online tool which will make it easier to compare rates of pay across regions, sectors and occupations.
It will take data from the annual survey of hours and earnings and display information about pay so that people are able to compare wages with others in their sector and region.
Mr Cable hopes that by having the facts, people will be empowered to discuss pay with their employers and businesses will be encouraged to consider whether they can increase rates.
The government is also launching a consultation with businesses on the future minimum wage for apprentices.
Mr Cable said: "We know there is a persistent problem with low pay in some sectors of the economy, and areas of the UK. The minimum wage system is necessary and right, but is a minimum by definition.
"Good employers want to be responsible and reward their staff as much as they can afford in order to attract the best people and have a happy, motivated and productive workforce.
"By making it easier to compare salaries we can encourage businesses to consider whether they can increase levels of pay or work with their employees to provide a path out of low pay."
Shadow business secretaryChuka Umunna said: "This 20p rise falls far short of the £7 minimum wage which George Osborne promised over a year ago. Ministers have misled working families who have been left worse off.
"Where under David Cameron we've seen the value of the minimum wage eroded, we need a recovery for working people."
CBI director-generalJohn Cridland said: "It's positive that the government has accepted the independent Low Pay Commission's (LPC) recommendations on the adult and youth rates. The commission struck a careful balance, helping many low-paid workers without damaging their job prospects.
"Therefore it's disappointing that the government has rejected the LPC's recommendation on the apprentice rate.
"The national minimum wage has been one of the most successful policies of recent years, thanks to the independence of the commission - its politicisation is worrying."
TUC general secretary Frances O'Grady said: "For the low-paid to get a fair share of the recovery, this was a year in which we could have had a much bolder increase in the minimum wage.
"With one in five workers getting less than a living wage, this is nowhere near enough to end in-work poverty. Britain's minimum-wage workers should be very fearful of the billions of pounds of cuts to government help for the low-paid that the Chancellor is planning if re-elected."
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