Unions and the government have agreed a new pay deal for thousands of hospital cleaners, porters and catering staff providing NHS services.
Contract workers provide services such as cleaning to the NHS
The deal applies to around 50,000 people working for companies contracted to do NHS work.
In the past, many have had lower pay and worse conditions than their counterparts in the health service.
Unions said the deal had averted the threat of widespread industrial action and ended the "two tier" pay system.
Health Secretary Patricia Hewitt said that contracted staff would be brought into line with the NHS Agenda for Change pay deal covering NHS workers from next October, and would be entitled to the same terms and conditions.
In the meantime, the workers covered by the agreement would receive a minimum of £5.65 an hour basic pay from October 1, this year, above the national minimum wage.
Some currently earn as little as £4.85 an hour, unions say.
The agreement means the minimum hourly rate will rise to £5.88 from April 2006 - matching the current minimum under the Agenda for Change pay deal, which covers 1.2 million NHS employees.
Funding the new arrangements will cost around £75 million a year from October 2006 when the deal is fully introduced.
Those working for outside firms will also receive better development and training, and have closer involvement in NHS workforce reforms under the agreement.
The deal was reached by the Department of Health, NHS unions, NHS Employers and other key organisations involved in representing the interests of workers and employers.
Ms Hewitt said it was "excellent news" for the thousands of staff working in the NHS but employed by contractors.
"The reason we have worked so hard to secure this agreement is that cleaners and porters and catering assistants are all part of the team that delivers care to our patients, whether they are employed directly by the NHS or through a contractor."
Ms Hewitt said the staff were key to delivering cleaner hospitals, reducing MRSA and making sure patients had good meals.
She added: "This deal will help ensure better services for patients in our hospitals."
Steve Barnett, director of NHS Employers - part of the NHS Confederation which manages workforce issues - said: "This is an important agreement which will make a big difference to the lives of thousands of staff who are part of the wider NHS team."
Dave Prentis, General Secretary of Unison, said: "I have always said that ending the two tier workforce is a defining issue between Unison and the government.
"These new proposals have narrowly averted widespread industrial action across the country over the winter."
But he said some staff, such as those in diagnostic treatment centres and electricians and maintenance engineers, were still excluded.
Paul Kenny, Acting General Secretary of the GMB union, said: "GMB fought long and hard to end the two-tier workforce in the NHS.
"This agreement will lead to cleaner hospitals as a result of the better morale of the privatised staff who will no longer be treated as second class citizens in the NHS."