Tynwald's voted to approve a 9.9% increase in the minimum wage from £12.25 to £13.46 per hour.
The change will come into force in April next year, alongside an increase in the Youth Rate from £9.55 to £10.76.
A total of 17 MHKs were in favour of the move and seven against, whilst it was unanimously passed by the Legislative Council.
It comes after the Isle of Man Chamber of Commerce warned against the move, saying it will hit local businesses.
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