The living wage will be set at 60% of the median wage in any given year.
The minimum wage will be phased out by 2026 and replaced by a new living wage, the Cabinet has agreed.
Tánaiste Leo Varadkar brought a memo to Cabinet proposing the living wage be set at 60% of the median wage in any given year.
The national minimum wage is currently €10.50 an hour.
Depending on the existing economic conditions of the time, the exact living wage would depend on the median wage in a given year.
However, the Department of Enterprise gave indicative figures illustrating how progress to a full living wage would be achieved by 2026 based on current projections.
That would see the living wage set at €12.17 an hour in 2022, €12.54 in 2023, €12.92 in 2024, €13.30 in 2025, €13.70 in 2026.
The proposal to introduce a 'Living Wage' is based on recommendations and research gathered by the Low Pay Commission.
The Tanaiste says he foresees a bump in people's pay once the living wage is introduced.
Leo Varadkar says it will certainly be an increase on where we are at the moment: