Money (7)

The National Living Wage has now come into effect, meaning all workers over the age of 25 must be paid at least £7.20 per hour.

Official estimates from the Office for Budget Responsibility (OBR) suggest that around 1.3 million workers around the country will see an immediate benefit.

The National Living Wage will increase to around £9 an hour by 2020, although some have suggest it could be higher. The OBR forecasts this will directly benefit a further 2.9 million people. And including the "spill over" effect, where businesses will raise other wages to maintain pay differentials, the OBR believes six million people will be better off.

However, there have been widespread concerns of the effects the National Living Wage will have on the UK's smaller businesses. The OBR has forecast around 60,000 jobs will be cut as a direct result of the higher costs brought on by the National Living Wage. In November, a report by the CIPD said that half of the UK's employers would see their wage bill rise as a result of the new law. And government advisers have reported that the National Living Wage will add around £1 billion to businesses' overall wage bill.

The Living Wage Foundation, which sets a voluntary pay level of £8.25, and £9.40 in London, urged the government and businesses to do more to tackle low pay.

Katherine Chapman, the Living Wage Foundation's director, said: "The job is not done when it comes to tackling low pay.

"Businesses who can afford to pay a rate that reflects the real cost of living should do so and join over 2,300 employers signed up to pay our higher voluntary Living Wage.

"For profitable business or those who see themselves as innovators and leaders, simply not breaking the law on pay is not enough. Many businesses want to aim higher."

The TUC union said the government now needs to do more to ensure younger workers are not left behind. There have been concerns raised that a 24 year-old workers doing the exact same job as a 25 year-old colleague would be paid less.

Frances O'Grady, general secretary of the TUC, said: "Britain desperately needs a pay rise, and this increase is good news for those aged 25 or older.

"But the government must ensure that younger workers are not left behind; 21 to 24-year-olds will not be seeing an increase.

"This is not fair. Future wage increases must narrow the pay gap between old and young."