Nestle, the world's biggest food company, has become the first major manufacturer to commit to paying the Living Wage in a move welcomed by campaigners.
The company already pays the Living Wage to its 8,000 staff, but the move will now include 800 contractors and agency workers with Nestle vowing to implement the higher rate by the end of 2017.
Nestle UK & Ireland chief executive Fiona Kendrick said: "As a major UK employer, we know that this is the right thing to do. Not only does it benefit our employees but also the communities they live and work in."
The living wage, which is £8.80 an hour in London and £7.65 an hour elsewhere, is measured on the basic cost of living in an area, compared to the national minimum wage of £6.31.
Living Wage Foundation director Rhys Moore added: "We hope that the leadership they have shown will encourage others in this industry to follow suit and improve conditions for those at the lowest end of the pay scale and sub-contracted staff."
Business secretary Vince Cable welcomed Nestlé's decision and said he would encourage all businesses to pay their staff above the minimum wage as long as "it is affordable and not at the expense of jobs".
The shadow business secretary, Chuka Umunna, added: "It is fantastic news that Nestlé is announcing its accreditation as a living wage employer, having worked in collaboration with Unite, GMB and the Living Wage Foundation to achieve this."