Increases to the national living wage fell short of forecasted expectations.
The rate will rise 30p to £7.50 in April 2017, but experts predicted it would rise to £7.60.
Chancellor Philip Hammond announced the four per cent increase to wages for over-25s in his Autumn Statement Wednesday.
This equals an increase of £500 a year to over a million full-time workers, Hammond said.
The national living wage was originally introduced by former chancellor George Osborne, who said it would reach £9 an hour by 2020.
The national minimum wage rates have also been announced, from April 2017:
- increase the rate for 21 to 24 year olds from £6.95 to £7.05 per hour
- increase the rate for 18 to 20 year olds from £5.55 to £5.60 per hour
- increase the rate for 16 to 17 year olds from £4.00 to £4.05 per hour
- increase the rate for apprentices from £3.40 to £3.50 per hour
The government will invest an additional £4.3m per year to strengthen the enforcement of the national minimum wages, and it will provide additional support to small businesses to help them to comply.
Guy Stallard, director of KPMG, said the increase to wages will "go a long way to save swathes of people being caught between the desire to contribute to society and the inability to afford to do so".
He added that his experience as an employer paying the Living Wage has shown "real and tangible" benefits like improved staff morale, a rise in service standards, improvement in the retention of staff and increase in productivity.
All organisations need to do what they can to address the problem of low pay, he said.
Global financial services firm Duff & Phelps' managing director Phil Duffy said businesses, especially in the labour intensive retail sector, will be considering a variety of ways to reduce the impact of higher employment costs.
These may range from overall reductions in the number of employees, or more likely hours of employment, to some businesses looking to pass on the additional costs to their customers. But this may not be an option for businesses tied into long term supply contracts or where competition comes from lower wage countries. In the current environment, businesses are already struggling with currency exchange volatility and in the long run the prospect of higher costs of doing business will inevitably have to be passed on to customers.
The rate is still below the independent Living Wage Foundation's calculations of £8.45 across the UK and £9.75 in London.
Katherine Champan, director of the Living Wage Foundation, said the increases to the National Living Wage are welcome in this time of economic uncertainty, but it is still not enough to help families meet everyday costs.