National Minimum Wage rates are to rise from October 2010, with the minimum rate for workers aged 21 and over rising to £5.93 an hour.
Apprentice pay will also be covered by the minimum wage framework for the first time with a new apprentice rate of £2.50 an hour. The Low Pay Commission considers that this change 'should make apprentice pay across the UK easier to administer and subject to better enforcement arrangements.'
David Norgrove, Chair of the Low Pay Commission, said:
"The UK economy is on track for recovery, but the speed and strength of that recovery are unclear. We have recommended an increase in the adult rate of the National Minimum Wage that balances the needs of workers against the challenges that remain for businesses.
"This year, the Commission has paid particular attention to the vulnerability of young people in the labour market. They have been affected more than anyone else in this recession and our recommendations reflect their vulnerability. We shall be focusing research effort in this area in the coming year.
"We are pleased that apprentice pay will, for the first time, be brought within the National Minimum Wage framework. Our aim was that the apprentice arrangements should be simple, robust and straightforward to administer and enforce."
Charles Cotton, CIPD Performance and Reward Adviser said:
"The LPC is a generally sensible body but this year's recommended hike in the NMW looks to have thrown caution to the wind, especially with regard to the youth and new apprenticeship rate.
"It is difficult to see how this increase will help create jobs or offer a boost in training places for unemployed young people. In particular, combining a higher minimum wage with the impending hike in employers' national insurance contributions really would represent a hefty 'tax on jobs'. Pricing young people out of work, while also using taxpayers' money to subsidise a youth jobs guarantee, doesn't make sense. We'd have hoped for a more joined up approach.
But the TUC disagreed. TUC General Secretary Brendan Barber said:
"Once again the Low Pay Commission has managed to resist employer calls for a freeze and has been able to agree a modest increase to the minimum wage rate despite the difficult economic times.
"This rise will benefit around a million people and will mean an extra £5.20 in the wage packet of a 40-hour per week worker on the minimum wage.
"This is a relatively modest increase which the evidence shows employers can afford.
"In a rich country like the UK it is important that those who do low paid jobs are not left behind. It would be particularly unfair if low paid workers had to bear a disproportionate part of the cost of the economic mess created by super-rich city bankers, who are still claiming their bonuses.
"A decent minimum wage is one of the benchmarks of a decent society."
