Tesco will increase store staff wages by up to 3.1% to an hourly rate of £7.62 from July 3.
The two-year deal means its store staff will be paid above the government’s national living wage of £7.20 per hour, which comes into effect from April.
Tesco store workers are currently paid £7.39 per hour, which will rise to £7.62 in July. New starters are paid £7.02 per hour, which will rise to £7.20 in April and £7.24 in July.
The increase will be given to Tesco employees of all ages, while the national living wage only applies to workers aged 25 and over.
Tesco said it worked with union Usdaw and staff representatives to agree the deal.
As part of the package, the supermarket chain has also simplified its premium payments so all workers receive time and a half for Sunday and bank holiday shifts from July this year.
A spokesman for Tesco said the majority of workers are currently paid time and a half but “a small minority” are paid double time.
Workers negatively impacted by the changes will be supported with a lump sum transition payment worth 18 months of the difference in pay, he said.
“We’ve spent a lot of time working with Usdaw and colleague representatives to understand what’s important to colleagues,” said Matt Davies, chief executive of UK and Republic of Ireland at Tesco.
“Together, we’ve agreed one of the highest pay and benefits packages in retail for store colleagues, and introduced a simpler and fairer pay structure, including one approach to premium payments.
“As well as an increase in pay, which puts our hourly rate well above the government’s national living wage, we remain absolutely committed to rewarding our colleagues with a pay and benefits package they really value, including a pension, colleague discount and 5% turnaround bonus.”