This article is more than 1 year old

This article is more than 1 year old

Almost 2 million workers in the UK are in line for a pay rise on Monday as the legal minimum wage increases by nearly 5%.

Adults on pay rates rebranded as the “national living wage” will receive a 4.9% rise from £7.83 to £8.21 an hour, worth an extra £690 over a year and affecting around 1.6 million people. The hourly rate for 21- to 24-year-olds will go up from £7.38 to £7.70, and for 18- to 20-year-olds from £5.90 to £6.15 in increases that cover about 230,000 people.

Kelly Tolhurst, the business minister, said: “Our minimum wage rates are among the highest in the world and, through our modern industrial strategy, we are determined to end low pay and workers get a fair day’s pay for a fair day’s work.”

The national minimum wage, which was launched 20 years ago, was rebranded the “national living wage” from 2016 in a move that was criticised as the new name might be confused with the so-called real living wage.

The real living wage is an independently calculated pay rate designed to reflect what people need to spend to feed, clothe and house themselves, and stands at £9 an hour, or £10.55 in London.

Katherine Chapman, the director of the Living Wage Foundation, said: “The increase in the government minimum wage will provide a welcome boost for low-paid workers, but this is still over £1,500 a year short of a real living wage.

“Around 6 million workers are now paid less than the living wage and are struggling to keep their heads above water.”

Rises in the compulsory minimum wage have also failed to keep pace with the average pay of FTSE 100 chief executives. According to the GMB union, the national minimum would now stand at £11.41 if low-paid workers had enjoyed the same level of pay rises as the country’s top bosses.

The TUC added that the average 21- to 24-year-old minimum wage worker is earning £800 a year less than over-25s.

The TUC’s general secretary, Frances O’Grady, said: “Young workers are still getting a raw deal on pay. Their bills aren’t any cheaper, but they have to make ends meet with less.”