J Sainsbury will become the first big supermarket to pay shop-floor staff £11 an hour as it brought forward its annual pay review by a month in response to cost of living pressures.
The increase from £10.25 to £11 — with London-based staff earning £11.95 an hour — will apply to 127,000 employees in stores and distribution centres from February and will cost the retailer £185mn over the course of a financial year.
Simon Roberts, chief executive, said the group was “acutely aware of how tough things are for millions of households this winter”.
“It’s our job to support our colleagues as they face rising costs,” he added. “This is a massive investment that reflects the real challenges our people are facing right now”.
Dave Gill, national officer at shop workers union Usdaw, described the pay awards as “unprecedented” and said they would “make a significant difference to our members”.
“With the cost of living continually rising, we have kept open our dialogue with Sainsbury’s and we are pleased the business has responded so positively,” he added.
The move comes after discounter Aldi said last year it would pay all store staff £11 an hour and £12.45 an hour within the M25 from January.
Rising wage costs are a big issue for supermarkets, which employ hundreds of thousands of people in stores and depots. Sainsbury’s, the UK’s second-largest supermarket chain, spends more than £3bn a year on wages and salaries and said its per-hour wages had risen 38 per cent over six years. Pay has increased by 10 per cent over the past 12 months alone.
The group came under pressure last year from a coalition of investor groups to adopt the real living wage, a non-statutory pay rate based on the cost of living. But the resolution was heavily defeated at the company’s annual meeting.
Like others, Sainsbury’s balked at the idea of committing to implement wage increases decided by third parties even though its increased pay rates match or exceed the current real living wage of £10.90 an hour outside London and £11.95 in the capital.
Wage inflation in retail was initially driven by increases in the UK’s statutory minimum wage after the introduction in 2015 of a “national living wage” for the over-25s, then set at £7.20 an hour.
That has since increased to £9.50 an hour — though all the large supermarket groups are already paying more than £10 — and will rise to £10.42 in April. It applies to everyone over the age of 23.
More recently, the sharp fall in inward migration from the EU following Brexit and the withdrawal of large numbers of older workers from the employment market have compounded staff shortages in lower paid sectors.
In addition to competing on headline hourly rates, retailers are increasingly beefing up employment benefits packages. Sainsbury’s said that alongside its latest wage rises it would extend free food during shifts for another six months and additional discounts at Argos, its general merchandise subsidiary.
Sainsbury’s plans to fund the cost of the increases through its “save to invest” programme, which aims to reduce costs by £1.3bn by 2024.
Like other retailers it has increased automation, most visibly in the form of self-checkout tills, and cut back on labour-intensive activities that do not add much to profits, such as in-store cafés and fresh meat and fish counters.
It has also cut salaried jobs elsewhere, including at manager levels in stores, and introduced more flexible contracts that reduce demarcation and provide for equal hourly pay regardless of age. Even so, the group’s total staff count, at around 118,000 full-time equivalent roles, has changed little over the past five years.