The increase was announced by finance minister Jeremy Hunt on Tuesday, ahead of the Autumn Statement.
Around 2.7 million workers will benefit directly from the increases, the government said.
As part of the changes, workers aged 21 and 22 will be entitled to the full minimum wage for the first time, while lower rates paid to workers aged 18 to 20 and apprentices will also increase.
Read more: More than 200 employers named and shamed for failing to pay national minimum wage
Kate Shoesmith, deputy chief executive of the Recruitment and Employment Confederation (REC), said the increase will be a lifeline for minimum wage workers and help solve labour shortages.
She said: “This rise rightly takes into account both cost of living increases and the slow path of pay growth over the last decade or so.
“It will be a challenge for some employers to adapt but it should help make working in some sectors that are experiencing labour shortages, such as hospitality, care and retail, more attractive at a time when our data shows more than 2 million job postings in the UK.”
However, some employers will struggle to accommodate the large wage increase, according Ian Moore, founder of consultancy Lodge Court.
Speaking to HR magazine, he said: “While this is good news for those on the minimum wage, not everyone wins.
"This increase will have a significant impact on employers who will need to adjust their budgets to accommodate this change, and it may cause frustration to higher earners who will fall victim to wage compression whereby the difference between their pay and that of the lowest earners shrinks.
“Employers will need to manage these changes strategically to maintain business stability, fairness and employee morale, otherwise the pain will outweigh the gain.”
Read more: 2023 statutory pay rise cheat sheet: everything HR needs to know
