Lidl says it will become the first supermarket to bring in the minimum wage recommended by the Living Wage Foundation.
The budget chain will give a pay rise worth £1,200 a year for over half its workforce from 1 October.
It will pay a minimum of £8.20 an hour across England, Scotland and Wales and £9.35 per hour in London – a move that will cost the firm £9m.
Lidl has also pledged to increase minimum wages further if the Living Wage Foundation sets a higher rate than expected in November.
It announced the move as a string of retailers warn that the introduction of the Government’s National Living Wage next April risks being passed on to customers in the form of price increases.
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Next and the owner of Costa Coffee have been among high street chains rounding on the policy, which guarantees workers aged 25 and over at least £7.20 an hour initially.
Their concerns have been supported by the head of the business lobby group the CBI, John Cridland, who recently described the wage plan as a “gamble.”
A Lidl spokeswoman said its prices would not rise as a result of the wage increases it was bringing in.
Ronny Gottschlich, chief executive of Lidl UK, said: “We recognise that every employee forms an integral part of team Lidl, and each individual’s contribution is valued.
“It’s therefore only right that we show our commitment, in the same way that the team commit to the business and our customers each and every day, by ensuring a wage that supports the cost of living.”