Tesco's 233,000 staff to receive pay rise above UK average

Tesco's 233,000 UK staff will receive a 2.5 per cent increase from next month following talks with trade union Usdaw.

Customer assistants - who make up about 65 per cent of store staff - will receive an additional 0.2 percentage points, taking their hourly rate past 7 for the first time.

The increase is lower than the rate of inflation - which remained at 4.5 per cent in May - but is ahead of the latest average earnings figures, which showed an increase of just 1.8 per cent in the year to April.

Tesco and the wider supermarket sector have come under pressure recently as consumers rein in spending to combat the rising cost of living against slowing wage growth and the faltering economy.

On Tuesday, Tesco posted a 0.1 per cent drop in like-for-like first quarter sales, excluding VAT and fuel, a slight improvement on the 0.7 per cent fall in the previous quarter but worse than City expectations. Total group sales, including fuel and VAT, were up 7.8 per cent.

The group unveiled an overhaul of executive pay last month after nearly 40 per cent of its shareholders voted against the remuneration report at its annual general meeting last year.

It has abolished executive share options and simplified four long-term incentive plans into one single scheme.

But chief executive Philip Clarke could still pick up nearly 7 million in pay and bonuses this year if the company meets all of its targets. A separate scheme for US boss Tim Mason was scrapped.

The company announced that about 225,000 of its staff were to share a record 110m bonus pot following its full-year profits haul of 3.8 billion.

UK chief executive Richard Brasher said: "We continue to invest in our people because they are our most valuable asset."