MORE than a million workers will be pocketing an extra 20 pence an hour following the Government's announcement yesterday to increase in the national minimum wage.

The new adult rate is £6.70 an hour, while the statutory figure for 18 to 20-year-olds will be £5.30, which is up from £5.13. For those under the age of 18 their hourly rate will go up by 8p to £3.87, while the apprenticeship rate will rise by 57p to £3.30.

The new rates come into force ahead of the planned national living wage of £7.20 an hour for over 25-year-olds from next April.

The Government said the 3 per cent rise in the adult rate is the biggest real increase since 2006 and moves the minimum wage closer to the average wage than ever before.

The new rate means a full-time employee working 40 hours will see the largest cash increase in their annual pay packets since 2008.

Nicola Bailey, development manager of the Somerset and Wiltshire Federation of Small Businesses, welcomed the announcement but said there would be significant challenges to small firms on the road ahead.

“The FSB is a long standing supporter of the Minimum Wage and we’ve always been very clear that employers must make sure they meet this important legal obligation," she said.

" Nevertheless, the introduction of the new National Living Wage is the most radical change to wages in recent years and will pose significant challenges to many small firms, particularly in the social care, hospitality and retails sectors where pay tends to be lower.

“The Government must clearly and proactively communicate the change to employers – ensuring businesses fully understand what they need to do and when. This support and guidance is necessary so small businesses avoid inadvertently falling foul of the changes to the law.

"In addition, ministers should review the Employment Allowance, which must be set at the right level to help businesses meet the costs of the National Living wage.

“It is one of a cascade of challenges that are hitting small business owners at the moment including reforms to Dividends Tax and the new Pensions Auto-enrolment legislation.”

Elsewhere in the country the news was greeted less enthusiastically by union bosses.

TUC general secretary Frances O'Grady said: "Today's increase in the national minimum wage is welcome but hardly cause for euphoria.

"It is hard to celebrate when many low-income families will see this and future gains wiped out by the Chancellor's cuts to tax credits and when under-25s will be excluded from the new supplement that comes in next April.

"Giving with one hand and taking more with the other is not the way to make work pay. Slashing vital in-work benefits will serve only to push more working households into poverty.

"We won't have a recovery for the many by taking an axe to the welfare budget."