Morrisons decided to up hourly wages for about 90,000 of workers.
The grocer said store staff will now get £8.20 an hour, compared the previous minimum of £6.83.
Supplements, such as those for Sunday work, will also be simplified.
The Bradford-based retailer said the increase would require an extra investment of more than £40 million.
It had already flagged up a rising wage bill as a result of the national living wage, which will elevate pay to £7.20 an hour for workers over 25 from April.
Morrisons staff have faced a tense time of late, with new chief executive David Potts orchestrating a radical overhaul of the group to end years of sales declines.
Earlier this month, more than 900 jobs were put at risk when the company announced 11 store closures. That came on top of 4000 job cuts at the company in the last six months, as it shrunk its head office operations and sold off its convenience store operations.
Potts said in a statement that the wage hike came in response to workers' demands for more competitive and simpler pay.
"By paying a significantly higher hourly rate, we are recognising the contribution of our excellent staff, who are so important to the revival of Morrisons," he added.
Usdaw, the shopworkers’ union, has recommended the new pay deal to members.Reuse content