The coffee and sandwich chain said that more than 16,000 workers across its 1,520 company-owned stores, will get a rise of between 6.1% and 7.3% from April 1.
It said base pay rates for baristas will increase from £10 an hour to at least £10.70 (€12.09) an hour, whilst more experienced "Barista Maestros" will see an uplift from £10.53 to at least £11.23 (€12.69) per hour, depending on location and role.
The UK government-mandated National Living Wage will rise to £10.42 an hour from April, an increase of 9.7%.
A 14% Increase In A Year
Costa Coffee said its latest rise takes the increase over the last 12 months to over 14%. UK inflation was 10.1% in January.
The Bank of England is watching pay settlements closely as it weighs further rises in interest rates.
Costa Coffee said it wanted to support its workforce in "uncertain times".
Tight Labour Market
But the latest rise also likely reflects Britain's still tight labour market. Data last month showed that despite being on the brink of recession, the country's jobless rate held close to five-decade lows and employment grew.
Rival Pret announced another pay rise for its staff last week, while food retailers Tesco, Asda and Marks & Spencer have also all recently announced increases.
Costa Coffee said it also provides workers with a store performance related bonus, free drinks while on shift and a 50% staff discount.