Tesco will shrug off criticism of its role in the Government's "workfare" scheme today by creating 20,000 jobs as it attempts to revive sluggish sales and tighten its grip on Britain's shopping basket.

Britain's biggest supermarket will flood its 2,175 stores with the new staff at busy times to improve customer service and concentrate the £67bn-a-year business on fresh food.

The announcement – warmly welcomed by the Government amid rising unemployment – comes at a particularly testing time for the grocery chain.

In January, after 11 months in the job, Tesco's new chief executive, Philip Clarke, disclosed that like-for-like sales had slipped 1.3 per cent over the Christmas period, as it lost out to rivals who invested more in promotions.

Explaining that profit warning, its first for 20 years, Mr Clarke took an apparent swipe at his predecessor, Sir Terry Leahy, by suggesting that Tesco – which has expanded rapidly overseas in recent years in the US and Asia – had not invested enough in its British business.

"We've been running the stores a bit hot for a while and we need to invest back in people in the stores and product in the stores," Mr Clarke said. The new chief executive said he was determined to match the growth of Asda, Sainsbury's and Morrisons. The company has struggled to project positive news since Mr Clarke, formerly the group's international and IT director, took over in March.

Last August, Tesco's head of banking and online operations, Andrew Higginson, announced he was leaving, followed in January by the head of its Asian operations, David Potts.

Last month, Tesco came under fire for taking part in a Government scheme which removed the benefits of the young unemployed if they failed to complete a month of unpaid work experience. Following "slave labour" protests at its stores, Tesco said it would pay the workers and give jobs to all those who successfully completed their month.

Announcing the new jobs programme – which will begin immediately – Tesco said it would "invest significantly" in additional staff hours and training to improve customer experience, particularly on fresh produce, fresh meat, bakery and counter services, which it said shoppers most valued.

The company, the biggest private sector employer in the UK, suggested most of the jobs would go to the young unemployed.