The four largest supermarket chains are paying their staff "poverty" wages while making huge profits and raising executives' salaries, research suggests.

A report by the Fair Pay Network (FPN) – a coalition of charities and non-governmental organisations including Oxfam and the Trades Union Congress – says hundreds of thousands of workers at Tesco, Sainsburys, Asda and Morrisons are not paid the "living wage".

The living wage for Londoners – £8.30 – is the hourly rate the Greater London Authority deems necessary to ensure a basic standard of living. It is calculated at £7.20 outside the capital.

The GLA has also calculated that a London wage-earner who earns less than about £7.25 an hour will be living in poverty, even after benefits and tax credits are taken into account.

But the FPN's report estimates that supermarket workers are paid an average of £6.83 an hour and only one in seven receives a living wage. Living wage rates are not compulsory, unlike the national minimum wage, which is £4.98 an hour for 18 to 20-year-olds and £6.08 for over-21s.

However, the Prime Minister has described the living wage as "an idea whose time has come".

Mark Donne, a director of the Fair Play Network, said: "It cannot be acceptable to shareholders or customers of the big four supermarkets to see soaring profits, huge executive pay, incredible expansion and yet a large strata of employees getting into greater debt, unable to buy new shoes for their children and relying on state benefits to survive.

"This report demonstrates the chronic unfairness and inequality within these retailing giants and the contradictory message of the Coalition Government, who in one breath say 'work must pay' and with the next act encourage greater recruitment by poverty pay employers. This shameful, expensive, wasteful scandal must end."

The retailers defended their records and criticised the report, arguing that it was based on interviews with just 100 staff out of their combined total of 893,126 employees. They pointed out that workers also received performance-related bonuses and store discount cards on top of their basic salaries.

A spokesman for Tesco said: "Significantly, Tesco staff receive a higher level of basic pay than any other supermarket, without exception."

Norman Pickavance, the human resources director at Morrisons, said: "This is a poorly-researched report, providing little by the way of fresh insight."

Tom Ironside, of the British Retail Consortium, said: "We do not recognise the claims made in this report. Retailers support the national minimum wage as a way of setting a basic floor for decent pay. The vast majority of retail jobs pay above this level. Jobs in the sector are popular because of the opportunity to work part-time or flexible hours."

What they earn

£6.83 The average hourly rate of pay for supermarket workers interviewed for the Fair Pay Network's report.

£6.08 National minimum wage for over-21s.

£7.20 The 'living wage' outside London.