Rishi Sunak confirmed the increase in his Spending Review 2020, in which it was announced the national living wage will increase from £8.72 to £8.91 an hour from 1 April 2021.
The national living wage age threshold will also fall to cover those aged 23 and over – up from over-25s in 2020/21.
Workers aged between 21 and 22 will see their minimum hourly rate increase to £8.36, while the rate for 18 to 20-year-olds is set to rise to £6.56 an hour.
Under-18s and apprentices will see their respective rates hit £4.62 and £4.30 an hour.
Bryan Sanderson, chair at the Low-Pay Commission (LPC), said:
“The difficulty in looking forward, even to next April, is daunting.
“This prudent increase consolidates the considerable progress of recent years and provides a base from which we can move towards the Government’s target.”
The Treasury intends to increase the national living wage for workers aged 21 and over to £10.50 an hour by 2024.
Increasing these rates in the current climate, however, was a formidable task for the LPC, which had to balance the solvency risks to smaller employers with lower-paid workers’ needs.
Rain Newton-Smith, chief economist at the Confederation of British Industry, said:
“Many lower-paid workers have been the heroes of the COVID-19 crisis, but unemployment is rising in lower-paying sectors and these increases will be tough for some firms to afford.”
Ministers had been expected to freeze the 2021/22 rates after Sunak said in his Spring Budget 2020 speech that the rise will only go ahead “if economic conditions allow”.