Tesco has become the latest supermarket to increase pay as retailers face up to the rising minimum wage and try to retain staff.
The hourly pay rate for store workers will rise from £11.02 to £12.02 in April, while pay for workers in London will rise to £13.15 an hour.
More than 200,000 staff will benefit from the increase, Tesco said.
All staff will get the voluntary Real Living Wage, which is higher than the compulsory National Living Wage.
The National Living Wage, often referred to as the minimum wage, is set to rise to £11.44 an hour in April 2024 - and for the first time will include 21 and 22-year-olds.
As a result, many of the major supermarkets have been announcing pay deals over the past few weeks.
M&S raises pay in battle for supermarket staff
Tesco now joins Sainsbury's, Asda, Aldi, Lidl and M&S in increasing its minimum pay for staff outside of London to £12 per hour.
Aldi's higher pay has been in place since the start of February, while Lidl and Sainsbury's increased wage began in March. M&S's pay rise will begin in April, while Asda will bring in an interim increase on 1 April to £11.44 an hour before raising the rate to £12.04 an hour from 1 July.
As well as raising pay, Tesco also said it would be increasing paternity leave to six weeks fully paid.
In addition, Tesco said it would increase maximum company sick pay entitlement to 18 weeks for eligible colleagues.
The supermarket has dropped separate pay rates for inner London and outer London employees to create one London Allowance, and it said the £13.15 per hour rate for this area meant it kept in line with the voluntary London Real Living Wage.
Daniel Adams, national officer at the shopworkers' union Usdaw, said: "This deal not only delivers an inflation-busting increase for Tesco employees, but it also demonstrates the value of progressive employers engaging constructively with trade unions at a time when the cost-of-living pressures continue to be keenly felt by our members."
Tesco to increase pay for shop workers by 9.1%
Tesco is to increase basic pay for shop workers ahead of a rise in the national minimum wage (Ben Stevens/Parsons Media/PA)
Tesco is to increase store workers’ pay by 9.1% in a roughly £300 million investment.
It is the latest supermarket group to lift pay levels for workers ahead of the rise in the national minimum wage in April.
The national minimum wage will increase from its current rate of £10.42 per hour to £11.44 on April 1.
The grocery giant, which employs more than 330,000 people across the UK, will raise the basic hourly rate for store workers from £11.02 per hour to £12.02.
Tesco employs more than 330,000 people across the UK (Danny Lawson/PA)
It will also increase the pay of workers within the M25 to £13.15 per hour, from a current rate of £11.95 for those in inner London and £11.75 for those in outer London.
The pay deal announcement, which came after an agreement with the Usdaw trade union, will also see the business increase its paternity level to six weeks fully paid and raise maximum sick pay entitlement to 18 weeks.
Tesco UK chief executive Matthew Barnes said: “This represents another significant investment in our colleagues, building on the last two years of investment.
“We recognise the amazing work our colleagues do every day in serving our customers and we’re really proud to offer such competitive rates of pay alongside a great range of exclusive colleague benefits.”
Tesco will also increase its annual Colleague Clubcard discount allowance to £2,000, up from £1,500.
Usdaw national officer Daniel Adams said: “This deal not only delivers an inflation-busting increase for Tesco employees, but it also demonstrates the value of progressive employers engaging constructively with trade unions at a time when the cost-of-living pressures continue to be keenly felt by our members.
“We welcome the company’s positive response through our negotiations, which have resulted in the largest investment in pay in a single year, with the highest entry rate for store employees of any major supermarket.”
It comes days after rival Asda said it will increase its basic rate of staff pay to £12.04 per hour later this year.
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