The Government has agreed to the introduction of a new national 'living wage' to replace the minimum wage by 2026.
It will be phased in over a four-year period starting next year and will be set at 60% of the hourly median wage.
In 2023, it is estimated that 60% of median earnings would equate to approximately €13.10 per hour.
The minimum wage will increase by 80c from 1 January 2023 to €11.30 per hour.
This will be followed by gradual increases until the minimum wage reaches 60% of hourly median earnings.
In 2021, there were 164,000 people earning the National Minimum Wage.
Once the living wage has come into effect in 2026, subject to an assessment of the impact of the change, the Low Pay Commission will advise on the practicalities of gradually increasing the targeted threshold rate towards 66% of the hourly median wage.
"Extensive research and consultation took place, including with employer and worker representative groups, unions and the public, in order to ensure we introduce the living wage in a way which will benefit workers whilst also being manageable for businesses," said Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar.
"It's important to get the balance right," he added.
The living wage is defined as the minimum amount people need to live and take part in Irish society.
The Living Wage Technical Group (LWTG), which is supported by trade unions and charities, said last month that the hourly living wage rate should increase to €13.85 per hour to reflect the rising cost of living.