The government has approved a recommendation by the Low Pay Commission (LPC) to increase the national minimum wage (NMW) to £6.50 per hour in October this year.
More than one million workers will benefit from the pay rise of 3%, up from £6.31, seeing their wages increase by £355 a year.
In January, Chancellor George Osborne backed calls from many organisations such as the Trades Union Congress to increase the NMW to an above inflation rate of £7 per hour.
However, the CBI said that any recommendation on the NMW should be left to the LPC, which advises the government about the minimum wage.
The rate for 18-20 year olds will increase 2% from £5.03 to 5.13 per hour, with the rate for 16-17 year olds also rising 2% from £3.72 to £3.79 per hour.
Business secretary Vince Cable said the rise was the biggest cash increase in take home pay since 2008.
"This will benefit over one million workers on national minimum wage and marks the start of a welcome new phase in minimum wage policy.
"The experts will continue to advise government on future wage rises to help the low paid, and in the meantime I urge businesses to consider how all their staff - not just those on the minimum wage - can enjoy the benefits of recovery," he added.
CBI chief policy director welcomed the government's implementation of the LPC's recommendation: "The government's decision to accept the Low Pay Commission's recommendation of a 3% rise in the national minimum wage is a sensible one and will not put jobs at risk.
"This rise will strike the right balance between protecting jobs whilst ensuring those on minimum wage benefit as the economic recovery takes hold."
