Tesco has struck a new pay deal for shopworkers, where hourly rates will increase 10.5% over the next two years.

The grocer’s UK chief executive Matt Davies said this was Tesco’s biggest investment in store pay for 10 years.

Store staff are currently paid £7.62 an hour. This will increase to £8.42 an hour by November 2018. The retailer said that taken alongside its benefits package, which includes bonus plan and pension, the average Tesco worker will take home an equivalent hourly rate of £9.52 by November 2018.

Tesco said that 97% of staff will be better off under the new pay deal. However, those negatively impacted will receive a lump sum transition payment worth 18 months of the difference in pay.

Davies said: “This reward package sees our biggest investment in store pay for a decade, and gives colleagues a sustainable pay deal that rewards them for everything they do, while allowing us to also attract new talent.

“We also want to do all we can to help working parents and that’s why we are proud to offer a much-improved maternity package to our colleagues.”

Investing in staff

Through its new maternity package, Tesco staff will receive an additional 14 weeks’ half pay from October. It will also reduce the eligibility to qualify for its maternity package from two years with the company to one year from July next year.

Pauline Foulkes, national officer from Usdaw, which worked with Tesco to hammer out the deal, said: “Tesco’s recent difficulties are a matter of public record and the staff have played a big part in helping turn the company around.

“Last year they received a one-off 5% bonus in recognition of that. So we are delighted to have negotiated a permanent substantial pay rise that averages over 5% a year for the next two years.

“This pay deal is a big step forward and shows that the company is prepared to invest in the staff to help grow the business.”

Workers pay will increase in three stages. The hourly pay will increase from its current level of £7.62 to £8.02 in November 2017, then to £8.18 in July next year before the final increase to £8.42 four months later.

Sunday pay cut

However, Tesco is set to reduce premium payments for Sunday and bank holiday shifts from time and a half to time and a quarter in July 2018.

The grocer pointed out that maintaining higher Sunday pay rates bucked the trend in retail. Marks & Spencer and B&Q revealed last year they would remove premium pay rates for Sunday working.

Foulkes said: “We have managed to retain premium pay for Sunday and bank holiday working, despite a partial consolidation, even though most major retailers have now moved to a flat rate.”