Tesco has invested over £200m in its latest pay rise, with an above-inflation increase of 5.1% for hourly-paid colleagues.
Today’s announcement follows an agreement with trade union Usdaw, and will increase the hourly pay rate for colleagues working in stores and online fulfilment centres to £13.28 an hour, starting from 29 March 2026.
As part of the deal, the London location allowance will also increase, rising from £1.21 to £1.27, equating to an hourly rate of £14.55 for Tesco colleagues within the M25.
The move follows Sainsbury’s above-inflation pay increase of 5% in January this year, when it raised its hourly rate to £13.23 (£14.54 in London).
Over the past five years, Tesco has increased pay for its hourly-paid colleagues by 43%, further boosting what it describes as “a market-leading package of pay and benefits”.
Read more: Supermarket pay in 2026: what are store staff’s hourly rates?
During this period, Tesco has also introduced and enhanced other workforce benefits, offering a virtual GP service and enhanced family leave policies such as 26 weeks fully paid maternity and six weeks fully paid paternity leave. The full benefits package also includes a colleague Clubcard discount of up to 15%, a retirement savings plan, share saving scheme, and an employee assistance programme.
“Our colleagues play a vital role in delivering for our customers every single day,” said UK CEO Ashwin Prasad.
“I’m pleased we’re able to announce this pay deal which reflects our deep appreciation for everything they do and represents another meaningful investment in colleague pay. Together with our comprehensive benefits package, it reinforces Tesco as a place where people can build a rewarding, long‑term career and continue to grow and thrive.”
Usdaw national officer Daniel Adams credited union reps across the business for securing the pay deal, pointing out that, in addition to delivering a “real terms increase to wages”, the deal also “extends the gap between the Tesco rates of pay and the national living wage”.
Adams also said Tesco will be the first retailer to provide paid leave to staff who experience domestic abuse, which further demonstrates the value of a “modern and progressive relationship between independent trade unions and employers”.
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