Supermarket chain to boost 90,000 workers’ hourly pay to £8.20 next year – £1 more than chancellor’s ‘national living wage’

This article is more than 4 years old

This article is more than 4 years old

It is little more than two months since George Osborne stood at the despatch box and declared: “Britain deserves a pay rise.”

On Tuesday the UK’s fourth largest supermarket became the latest employer to take the hint – and stump up a pay deal better than the chancellor had in mind.

Morrisons is to increase pay for 90,000 shop floor staff to £8.20 an hour from March. That is above Osborne’s £7.20 “national living wage” announced in the July budget and even tops the living wage calculated by independent campaigners.

The pay rise – a hefty 20% increase from Morrisons’ current minimum wage for shop floor staff of £6.83 an hour – will apply to staff of all ages.

Some of the increase will be offset by changes to benefits - including the end of extra pay for Sundays and paid breaks - but the like-for-like pay rise will still be a considerable 13%. “We guarantee no worker will be worse off,” a spokesman said.

Morrisons said the move would cost £40m. The deal, negotiated with shopworkers’ union Usdaw, will be subject to a workers’ vote on 12 November.

David Potts, chief executive of Morrisons, said: “We have been listening to our colleagues who told us they want their pay to be more competitive and simpler. By paying a significantly higher hourly rate, we are recognising the contribution of our excellent staff, who are so important to the revival of Morrisons.”

The increase, which makes Morrisons the highest payer of the UK’s four biggest supermarkets, comes after German discounter Lidl set the pace earlier this month by agreeing to pay 9,000 staff at least £8.20 an hour.

Analysts said the struggling Morrisons, which is closing a number of stores after profits halved last year, could benefit from boosting morale and helping to retain experienced shopfloor staff.

“We would imagine that the majority of Morrisons colleagues will be absolutely cock-a-hoop about the stepped upward adjustment in pay,” said Clive Black, an analyst at Shore Capital. He said improving staff morale had played a key role in some previous retail turnarounds.

But Morrisons isn’t the only retailer that has rolled out a chunky pay rise this year.

After years of falling real wages as a result of the financial crisis, campaigners piled pressure on employers this year by highlighting that the government was topping up low pay through the benefits system.

They targeted the annual shareholder meetings of major retailers, including Morrisons, Next, Sainsbury’s and Tesco, with protests to demand the adoption of the full living wage. Then Osborne’s new national minimum wage, which takes effect next April, but only for over-25s, further highlighted the issue of low pay.

This month Sainsbury’s increased its standard rate for shopfloor staff by 4% to £7.36 an hour, Amazon staff pay increased to £7.20 an hour. In March, The Co-op committed to raising pay by 8.5% over two years to about £7.30 an hour.

John Hannett, general secretary of Usdaw, said retailers were realising they needed to tackle low pay: “There is a mood among employers that they don’t want to be the lowest.”

Retail recruitment experts said retailers were realising they had to offer better pay to get and keep good staff in a difficult and fast-changing market.

“Customers are getting a lot smarter and expect a good experience in stores. They are expecting a lot and that is being driven by social media,” said Oliver Nevel, director of retail and fashion at recruitment firm Michael Page.

He said would-be staff were as well informed as shoppers – with specialist websites enabling them to review pay and conditions at different businesses. Shop staff also switch jobs more regularly than other workers and will move fast to better payers.

Gill Owen, from the Living Wage Foundation, said: “This is wonderful news from Morrisons. Lidl’s announcement has prompted a review of pay practices and it shows consumers are beginning to recognise that the living wage is an important mark of a responsible business. We hope more will follow in Morrisons’ footsteps.”

The foundation recommends paying £7.85 outside London and £9.15 in London, but will announce new rates at the start of November. Its figures are based on research by the Centre for Research in Social Policy at Loughborough University into the income that households require to afford an acceptable standard of living.

Lidl said it would match the foundation’s new levels if they were higher than its current plan.

The only accredited national high street retailer is Oliver Bonas, the fashion and jewellery chain with 44 stores. Burberry has also adopted the living wage and Ikea has pledged to pay it to its 9,000 employees from April.

How the supermarkets compare on pay*

Morrisons: £8.20, no paid breaks, 10% staff discount and annual bonus

Lidl: £8.20, no paid breaks, 10% staff discount

Marks & Spencer: £7.41, no paid breaks, 20% staff discount and annual bonus

Tesco: £7.39, no paid breaks, 10% staff discount

Sainsbury’s: £7.36, paid breaks, 10% staff discount and annual bonus

The Co-operative: £6.73 (rising to £7.28 from October), paid breaks, 10% staff discount on food

Iceland: £7.12 (rising to £7.26 from October), no paid breaks, 10% staff discount (20% at Christmas)

Aldi: £7.25 (under review, announcement in January), paid breaks, no staff discount

Asda: £6.89 (rising to £7 from October), paid breaks, 10% staff discount and annual bonus

Waitrose: £6.92, paid breaks, 15% staff discount, 25% off the majority of John Lewis items, and profit share bonus (11% of salary last year)

*Minimum hourly rates