Iceland staff are to share a £14.6m pay increase from next month in a rare piece of good news for the retail sector.

In addition to a basic pay increase of 5%, many staff will benefit from moves to simplify the company’s pay structure, which includes the abolition of its lower pay rate for staff under the age of 18, and the introduction of a new premium rate for all stores within the M25.

Store staff will receive an average pay increase of 6.3%, with a maximum of 45.5%. Home delivery staff will receive an average pay increase of 13.1% and a maximum of 22.1%.

The total annual cost to the company is £14.6m.

Chief executive Malcolm Walker described the pay increases as “inflation beating” and said: “Since my colleagues and I returned to Iceland in 2005 we have made great strides in improving staff morale and working conditions, and significantly increasing pay rates. In total over these six years we have raised the hourly pay rate for store staff by 33.7% and for home delivery drivers by 49.8%.”

Walker said front line staff have moved from minimum wages to being “among the very best paid on the high street”.

A 67% stake in Iceland, owned by collapsed bank Landsbanki, is up for sale. Bidders are expected to put forward offers this month. Walker, who with his management team holds a 23% stake, is expected to try and buy back the chain fully. Also, rival Morrisons is understood to be considering a bid.