The British arm of German supermarket group Lidl will next year increase wages for thousands of workers by 2.9% to 3.4%, continuing to pay them at an hourly rate above that of the government-mandated National Living Wage, it said on Monday.
Lidl's pay rise, and a similar announcement from Amazon last month, could put pressure on retail rivals given historic low levels of unemployment.
Britain's unemployment rate is at its lowest in more than 40 years, and average pay excluding bonuses is now rising at its fastest rate since 2009, though for most of the year earnings growth has struggled to exceed inflation.
Lidl, part of Germany's Schwarz retail group, said entry-level wages will increase from £8.75 (€10 ) to £9.0 (€10.3) an hour outside of London, and from £10.20 (€11.7) to £10.55 (€12.1) an hour within the capital.
The increase, which will come into effect from 1 March next year, will directly benefit over 17,000 Lidl employees and cost the retailer an extra £8 million (€9.2 million).
The rise is in line with new rates proposed by campaigning group the Living Wage Foundation, and is almost 10% higher than the government's National Living wage detailed in last month's budget.
Lidl, vying with German discount rival Aldi as Britain's fastest growing supermarket group, currently trades from 720 UK stores and plans over 50 more in 2019.