Lidl is to pay the voluntary Living Wage of £8.45 an hour and £9.75 in London, higher than the statutory rate, to thousands of its workers.
The supermarket giant said the rates will be paid from March to 5,500 employees, a quarter of its UK workforce.
The rates are higher than the national Living Wage of £7.20 an hour, which the Chancellor announced in his Autumn Statement will go up to £7.50 next April.
Lidl board director Nan Gibson said: "We recognise the contribution of each and every colleague within the business and we feel it's important to celebrate our achievements together.
"So it fills me with pride that our colleagues are amongst the best paid in the supermarket sector, and it's absolutely deserved for the commitment and value they bring to the company every day."
Christian Hartnagel, Lidl UK chief executive, said: "This announcement comes at a time when our business is going from strength to strength and our market share has reached a record high of 4.6%. It is one of many commitments that we will be making to our colleagues in the near future."
The German-owned firm said it was the first British supermarket to announce it will pay the new voluntary rates, which are set by the Living Wage Foundation.
Lidl, which has 640 supermarkets in the UK, said its investment in the new rates would cost £3 million.
It added that it received a 20% increase in job applications after announcing a year ago that it would be paying the voluntary wage rates.