Hourly rates will increase by 10.5% over the next two years, from the current rate of £7.62 to £8.42 an hour by November 2018.
The pay will increase in three stages: from £7.62 to £8.02 in November 2017; from £8.02 to £8.18 in July 2018; and from £8.18 to £8.42 in November 2018.
The supermarket chain said that these increases, alongside Tesco’s benefits package (which includes a colleague bonus plan and pension), will take the average store colleague to an equivalent hourly rate of £9.52 by November 2018.
The retailer will continue to offer premium payments for Sunday and bank holiday shifts. Staff will receive time and a half for these shifts until July 2018, when the payments will change to time and a quarter.
Under the new agreement, 97% of colleagues will be better off according to Tesco. But it added that any colleagues negatively impacted by the changes will be supported with a lump sum transition payment worth 18 months of the difference in pay, paid in July 2018.
Tesco worked with union Usdaw and elected colleague representatives to agree the deal.
Tesco UK chief executive officer Matt 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.”
He added: “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.”