Budget supermarket chain Lidl will pay 9,000 of its UK workers at least the full living wage from next month as the first major high street name to embrace the higher pay campaign. Lidl stressed that this would not mean more expensive shopping for its customers.

The German-owned supermarket chain said the move represented an average pay rise of £1,200 per year for thousands of staff, with all UK employees receiving at least £8.20 an hour in England, Scotland and Wales and at least £9.35 in London. It currently pays £7.30 an hour outside London and £8.03 in London.

The 14% average pay rise, costing £9m, will take minimum pay at Lidl past the level recommended by the Living Wage Foundation, which campaigns for companies to pay staff enough to meet the cost of living.

The foundation recommends paying £7.85 outside London and £9.15 in London and will announce new rates at the start of November. Lidl said it would match the foundation’s new levels if they were higher than those adopted by the company.

The foundation’s living wage is distinct from and higher than the “national living wage” announced by George Osborne in his July budget. The chancellor said the minimum wage, now £6.50 an hour, would be renamed and increased to £7.20 an hour from April, rising to more than £9 in 2020. Lidl said more than half its 17,000 UK workers would benefit from the pay increase and that its move would cover employees of all ages, unlike Osborne’s scheme which applies to workers aged over 25.

Every Lidl helps

Ronny Gottschlich, Lidl UK’s chief executive, said: “It’s 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. As a result, Lidl employees will be among the best paid in the supermarket sector, and that’s something I feel incredibly proud about.”

Years of falling real wages after the financial crisis, and the realisation that the government was topping up low pay through the benefits system, have increased pressure on employers to pay decent wages.

Campaigners have targeted the annual meetings of big retailers such as Next, Sainsbury’s and Tesco to demand adoption of the living wage. Sainsbury’s increased its standard rate for shop floor staff by 4% to £7.36 an hour this month.

Rhys Moore, director of the Living Wage Foundation, said Lidl’s adoption of the living wage was significant because it could put pressure on hitherto reluctant retailers to pay the living wage.  Moore said: “Lidl’s announcement is a massive breakthrough in the living wage campaign, and proves that paying staff a real living wage, calculated around the cost of living, is possible on the British high street.

Customers clear living wage supermarket choice

“It sets a challenge to the rest of the UK supermarket sector, that has until now claimed that paying staff the living wage was just not possible. Consumers can now genuinely make a living wage choice at the checkout.”

Moody’s, the credit rating agency, has predicted that supermarkets, which each employ many thousands of low-paid staff, would either have to cut jobs or increase prices to deal with Osborne’s plan. Manpower, the recruiter, has said the new rate has sent shockwaves through the labour market.

More than 1,700 employers are accredited by the Living Wage Foundation, including almost a quarter of the FTSE 100 and big names such as Nestlé and Chelsea FC.

The only accredited national high street retailer is Oliver Bonas, the fashion and jewellery chain with 44 stores. Burberry has also adopted the living wage and Ikea has pledged to pay it to its 9,000 employees from April.  Fashion retailer Oliver Bonas is the only other high street name to pay the living wage. Photograph: Amer Ghazzal/Demotix/Corbis

The foundation said it hoped Lidl would become an accredited employer to underline its commitment. Accredited companies promise to pay the living wage as it increases and to include contract staff such as cleaners as well as permanent employees.

Lidl said the company had not taken a decision on accreditation but that cleaners and other workers at stores and other Lidl premises are permanent employees.

She added: “At this stage our focus is on our employees and ensuring that the rollout is seamless. We feel confident that the Living Wage Foundation will welcome this announcement.”

The top 12 living wage employers

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