The minimum wage will rise from Saturday, benefiting more than a million workers. Adults must be paid at least �5.05 an hour, up from �4.85, while 18 to 21 year olds will get 15p more at �4.25.
The increase follows a report from the Low Pay Commission which said the number of jobs had grown since the minimum wage was introduced in 1999.
Unions welcomed the rise and said the "bleatings" of business looking for a wage freeze should be ignored.
"The increase will see well over a million low-paid workers with more cash in their pockets, many of them women working part-time," Brendan Barber, TUC general secretary, said.
"But, as ever, with each minimum wage increase comes the predictable wave of protests from business saying that it cannot afford another rise." Further rises planned
Further increases to the minimum wage are in the pipeline.
Back in February the government provisionally accepted the commission's recommendations that the rates should be further increased to �5.35 and �4.45 in October 2006.
However, the commission will report again early in 2006 on whether the UK economy can sustain a further rise in the minimum wage.
But business leaders are asking for an urgent reappraisal of planned future increases to the minimum wage.
"When the wage was introduced it was set at a reasonable level but since we have seen large increases," Lewis Sidnick, employment policy adviser at the British Chambers of Commerce (BCC) said.
"The government needs to recognise that the economy is worsening, while business costs are rising."
Sir Digby Jones, director general of the CBI added that next year's planned rise to �5.35 an hour would have a "serious impact" on some sectors of the economy.
"The UK is already edging towards the top of the international minimum wage league table," Sir Digby said.
"So it is critical that the impact of these increases is carefully considered by the government." BBC News