The national minimum wage will increase by 20p an hour to £6.70 from October, the government has announced.
The changes will benefit more than 1.4 million workers.
The hourly rate for younger workers will also rise, and for apprentices it will go up by 20% - or 57p - to £3.30 an hour.
The rates were recommended by the Low Pay Commission but the government has gone further than the 7p an hour increase suggested for apprentices.
Prime Minister David Cameron said the across-the-board increases would offer "more financial security" to workers, and "a better future" for Britain.
Labour said the minimum wage had been "eroded" under the coalition government.
'On your side'The 3% increase in the national minimum wage for adult workers is the biggest real-terms rise in seven years.
It was recommended by the Low Pay Commission - the independent body that advises the government on the minimum wage.
The statutory minimum for 18 to 20-year-olds will also go up by 3% from October, from £5.13 to £5.30, and by 2% for 16 and 17-year-olds, taking the rate to £3.87, as the LPC advised.
But the government has rejected the commission's proposed 7p an hour increase in the apprenticeship rate, choosing instead to increase it by 57p an hour.
The rate applies to apprentices aged 16 to 18 and those aged 19 or over who are in their first year. All other apprentices are entitled to the national minimum wage for their age.
Announcing the changes, Mr Cameron said: "At the heart of our long-term economic plan for Britain is a simple idea - that those who put in, should get out, that hard work is really rewarded, that the benefits of recovery are truly national.
"That's what today's announcement is all about, saying to hardworking taxpayers, this is a government that is on your side. It will mean more financial security for Britain's families and a better future for our country."
'Politicisation'Labour has promised the minimum wage would rise rise to £8 an hour over the course of the next parliament if it wins in May.
Commenting on the government's announcement, shadow business secretary Chuka Umunna said: "This 20p rise falls far short of the £7 minimum wage which [Chancellor] George Osborne promised over a year ago. Ministers have misled working families who have been left worse off."
"Where under David Cameron we've seen the value of the minimum wage eroded, we need a recovery for working people."
CBI director-general John Cridland said it was "positive" that the government had accepted the LPC's recommendations on the adult and youth rates.
But, he added, it was "disappointing" that ministers had chosen to increase the apprentice rate by more than suggested, saying he was worried by the "politicisation" of the commission.
Frances O'Grady, the general secretary of the TUC, said the rate increases go "nowhere near enough to end in-work poverty", and should have been "much bolder".
Are you currently on minimum wage? What do you think about the planned rise in minimum wage? Are you an employer? How will the rise affect you? You can email haveyoursay@bbc.co.uk with your experience. Please include a telephone number if you are willing to be contacted by a BBC journalist.
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