Some businesses fear that jobs may be cut to offset higher wage costs

The hourly rate is increasing from £4.50 to £4.85 for adults, and from £3.80 to £4.10 for workers aged between 18 and 21.

A rate of £3 an hour will be introduced for 16 and 17-year-olds as the government aims to "eradicate poverty".

More than 100,000 homeworkers, linked to the rate for the first time, will be thousands of pounds a year better off.

Campaigners have claimed that some people are paid as little as 73p an hour when they undertake work which can be done at home.

'Vulnerable group'

"We are committed to eradicating poverty pay and today's new rates are another big step towards turning that aim into a reality," said Trade and Industry Secretary Patricia Hewitt.

New minimum wage £4.85 per hour for adults £4.10 for 18-21 year olds £3 for 16-17 year olds What it means for business

"The change to the homeworking rules will protect people who work in an industry that has a history of exploitative rates of pay, especially minority ethnic and women workers.

"The new rate for 16 and 17-year-olds extends protection to another vulnerable group of people. We want young people to stay in education or training but we must ensure that those who do choose to work are not exploited."

Low-paid workers should benefit from fatter wage packets

Oxfam welcomed the rises, but said more had to be done to ensure homeworkers had the same rights as staff in factories and offices.

Employers' worries

The CBI has earlier warned that the increase in minimum pay was a worry for business.

It said a survey of 520 companies found a quarter of them thought the rise would have a "significant" effect on their costs.

Larger firms expected the most damaging impact, the employers' group warned, with some saying jobs or hours would be cut to offset the cost.

The Forum of Private Business has also warned the rises would have a "variety of negative effects".

However, the TUC has welcomed the minimum wage rates, saying they were "doing the business".