Britain's Costa Coffee joins rush to hike workers' pay

(Adds comments from analyst, background)

By Paul Sandle

LONDON, Sept 30 (Reuters) - Customers at Costa Coffee may get an extra-caffeinated level of service on Thursday morning, when the chain becomes the latest British retailer to hike wages months before a government measure to raise minimum pay levels comes into effect.

The chain, part of leisure group Whitbread (LSE: WTB.L - news) , said on Wednesday its 12,500 trained baristas would earn a minimum of 7.40 pounds ($11.21) an hour, and 8.20 pounds in London, some 20 pence above the new "living wage" coming in next April (LSE: 0N69.L - news) .

Costa is following rival Starbucks (Swiss: SBUX.SW - news) and retailers Morrison and Lidl in announcing pay hikes for thousands of staff. Managing Director Chris Rogers said the rise had been in the works for months and was not prompted by the government's announcement in July.

"We've been planning for some time to look at the pay rates because we think it's really important our team share in the success of our business," he said. "It (Other OTC: ITGL - news) 's not a knee-jerk reaction."

Whitbread, along with clothing retailer Next (Other OTC: NXGPF - news) , pubs group Wetherspoon, and care workers provider Mears , had warned they would struggle with higher costs as a result of the minimum wage rise.

The wholesale and retail, hospitality and support services industries combined employ 46 percent, or 2.7 million, of those earning below the new minimum, according to the Resolution Foundation think tank.

Conor D'Arcy, policy analyst at the foundation, said the move showed big employers in low-paying sectors could adjust.

Costa's Rogers said it was difficult to calculate the net cost of the rise, because the company was also making better use of technology and improving productivity.

But he said it would not stop the group opening new stores. "(The rise) underpins our growth plans, because people are such an important ingredient in our business, so the better people we have, the better experience our customers will have," he said.

Finance Minister George Osborne in July announced a 10.7 percent rise in the minimum wage to 7.20 pounds an hour from next April for workers aged over 25, rising to 9 pounds an hour by 2020, saying Britain "deserved a pay rise".

The higher wage, which comes as the government curbs benefits that top-up pay for many low earners with children, will cost jobs, but Osborne said the effect would be small.

($1 = 0.6604 pounds) (Editing by David Holmes and Mark Potter)