Wirral Council has become one of the first local authorities to offer companies discounted business rates if they pay staff the so-called Living Wage.
Larger firms in the borough could save as much as £5,000 with varying discounts for smaller companies who pay adult employees £7.85 an hour.
The move was approved by the the council's cabinet when it met on Monday.
It reinforces the authority's commitment to the pay scheme, which began in 2012 when Wirral became one of the first councils in the country to guarantee all staff a Living Wage.
Council leader Cllr Phil Davies said: "Everyone should have the opportunity to provide adequately for themselves and their families.
"Low pay and the poverty trap affect thousands of workers. A Living Wage can make a real difference to people’s lives."
He said there are benefits for companies too. An independent study for the Living Wage Foundation found more than 80%of employers believed implementing it had enhanced the quality of the work of their staff while absenteeism fell by around 25%.
"Paying the Living Wage is not only the decent thing to do, it has proven benefits for business also," said Cllr Davies.
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