Tesco recently announced a second pay rise for its UK staff in 2025, with hourly wages set to increase to £12.64 from the end of August. The move, which includes a 7.1% uplift to the London allowance, will see workers in the capital earn £14.36 per hour, up from the current £13.15. This announcement marks another significant step in Tesco’s continued investment in staff remuneration, amounting to an above-inflation increase of 5.2%.
The pay increase is part of an £180 million commitment to employee pay and follows a series of wage adjustments that have seen hourly-paid staff experience a 32% rise in earnings since April 2022. In total, Tesco has channelled over £900 million into staff pay improvements over this period.
Speaking on the announcement before stepping down, Matthew Barnes, former CEO of Tesco UK, emphasised the company’s commitment to recognising the contribution of its frontline staff:
“Our employees are our greatest asset, and this pay deal recognises the brilliant work they put in day-in, day-out to serve our customers. It also represents another significant investment in our staff pay, which combined with our fantastic package of benefits, means Tesco continues to be a place to get on and thrive in a fulfilling and rewarding career.”
Broader benefits and changes to pay structures
In addition to the headline pay increase, Tesco will make several changes and enhancements to its employment package:
- Removal of Sunday premium payments: While this benefit is being phased out, eligible employees will receive a one-off compensation payment. Premiums for bank holiday work will remain in place.
- Improved sick pay: The maximum entitlement for eligible employees will be extended to 20 weeks, providing greater financial security during periods of ill health.
- Enhanced discount scheme: Tesco is replacing its previous £2,000 allowance with an uncapped Colleague Clubcard discount, available to both the employee and a second nominated Clubcard holder.
These changes complement Tesco’s existing benefits, which include:
- Virtual GP service for fast medical access
- 26 weeks’ fully paid maternity leave and six weeks’ fully paid paternity leave
- Free meals in store canteens
- A pay advance scheme
- Access to share save schemes
- An employee assistance programme (EAP) for personal and mental wellbeing
- A retirement savings plan matching contributions up to 7.5%
- An up to 15% discount on shopping for eligible colleagues
Strategic response to cost-of-living pressures
This pay review reflects Tesco’s continued responsiveness to the ongoing cost-of-living challenges facing UK households. While the headline inflation rate has cooled in recent months, pressures on disposable income remain acute for many workers. Tesco’s above-inflation pay increase not only offers practical financial relief but positions the company as a competitive employer in the retail sector.
The package is also indicative of a long-term workforce strategy aimed at improving staff retention, workplace fulfilment, and career development, especially at a time when the retail sector continues to face recruitment and retention challenges.
Looking ahead
Tesco’s continued investment in employee pay and conditions signals a determined effort to remain at the forefront of responsible employment practices in the UK. With the company underlining the importance of its people as key to its success, it is likely that further improvements in working conditions and staff engagement initiatives will follow.
For employees already with the company, these changes bring welcome reassurance, while for prospective staff, they offer a compelling proposition at a time when jobseekers are placing greater emphasis on benefits and stability.
