Sainsbury's, Britain's second largest supermarket group and one of the country's biggest private sector employers, will raise the basic hourly pay of its store workers to at least £10 (€11.99) an hour from £9.50 previously.
The group said on Friday the rate will increase to £11.05 from £10.10 for workers in inner London, and to £10.50 from £9.75 in outer London.
The rise also covers workers in the group's Argos general merchandise business.
The Bank of England is keeping a close eye on wage settlements as it ponders whether to raise interest rates again.
Additional Payment Rates
Sainsbury's said it was also increasing additional payment rates for drivers - a sector which is facing an acute shortage.
Groceries Online drivers will now get £11.50 per hour, with a basic rate of £10 per hour plus an extra £1.50 per hour.
Argos Fast Track Delivery drivers will receive £11 per hour based on a base rate of £10 per hour plus an extra £1, up from 75 pence.
"While demand for online deliveries remains high, this enhanced pay will help the retailer recruit and retain the best talent," Sainsbury's said.
National Living Wage
It said the new rates of pay exceed the government mandated National Living Wage and the National Real Living Wage and represent a £100 million investment from Sainsbury’s in its staff.
The pay increases will come into effect from March.
Last year Morrisons, Britain's No. 4 supermarket player, said it became the first British supermarket group to pay all its store staff at least £10 an hour.