National Living Wage Comes Into Force

Millions of workers will be paid more from today as the new national living wage becomes compulsory.

The rate that everyone over the age of 25 can expect to receive is £7.20 per hour, an increase of 50p per hour on the previous minimum wage.

But the new wage has attracted criticism with unions saying it is not fair that those under 25 will miss out, and business groups saying it could hit productivity.

TUC general secretary Frances O'Grady said: "Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older.

"But the Government must ensure that younger workers are not left behind - 21 to 24-year-olds will not be seeing an increase.

"This is not fair. Future (Other OTC: FRNWF - news) wage increases must narrow the pay gap between old and young."

But Dr Adam Marshall, the acting director general of the British Chambers of Commerce, said: "The Government's new living wage will apply a ratchet effect to all companies' pay bills, and sits alongside a raft of other high employment-related costs.

"While many companies have the ability to increase pay, others will struggle to do so alongside pensions auto-enrolment, the apprenticeship levy, employer National Insurance contributions, and other up-front costs.

"Some will have to divert money from training and investment to increase pay, which could hurt their productivity. Others may stop hiring altogether."

The Government's aim is to increase the living wage to £9 an hour by 2020, a move that is likely to affect an estimated nine million workers.

Research by the Resolution Foundation found that more than a quarter of employees in the Midlands, Wales and Yorkshire and the Humber will benefit, compared to one-in-seven workers in London.

Labour accused the Government of performing a trick on the British people by giving with one hand and taking away with another.

Shadow work and pensions secretary Owen Smith said: "It (Other OTC: ITGL - news) 's a typically cruel sleight of hand from the Tories to introduce their version of the living wage with one hand, while taking five times as much in cuts to Universal Credit and Tax Credits with the other.

Josh Hardie of the Confederation of British Industry said: "For wage increases to be sustainable they must go hand-in-hand with productivity growth.

"If the living wage doesn't get this balance right it will risk being unaffordable for many firms. Smaller businesses and those in key sectors like hospitality, retail and care are likely to be particularly affected."