Lidl payrise may trigger wage increases at other supermarkets as discounter boosts pay for 9,000 workers by £1.2k a year

By Camilla Canocchi for Thisismoney.co.uk

Published: 01:11 EST, 18 September 2015 | Updated: 07:56 EST, 18 September 2015

View
comments

Britain's biggest supermarkets are expected to announce wage increases in the wake of Lidl's decision to hike pay for 9,000 of its workers.

The German discounter today promised it will not raise prices to cover the bill for higher pay as it became the first major high street name to pay its staff at least the full living wage.

Tesco and Morrisons are now expected to follow suit and announce wage increases as the battle among supermarkets intensifies and moves from price cuts to staff pay.

Lidl will actually pay more than the level recommended by the Living Wage Foundation, by increasing its minimum pay across England, Scotland and Wales from 7.30 to £8.20 from October 1. Workers in London will see pay rise from £8.03 to £9.35.

Pay rise: Lidl's move to increase the minimum pay to 9,000 of its workers will cost it £9million

It said that constituted a pay rise worth about £1,200 a year for more than 9,000 staff at its supermarkets. The move will cost the group £9million but Lidl said this will not be passed on to customers as higher prices on the shelves.

A spokeswoman said: ‘It's an investment in our people and as ever we will continue to offer our customers the very best quality at every day low prices.’

Sainsbury's increased wages by 4 per cent for its 137,000 staff from the end of August, setting a new hourly rate of £7.36 an hour, with Tesco and Morrisons expected to announce wage increases shortly.

A spokesman for Morrisons said: 'Our standard hourly rate of pay for store colleagues varies from a minimum of £6.83 to a minimum of £7.79 depending on location around the country.

'However, we haven't as yet concluded this year's annual pay negotiations so these will change.'

Tesco, which pays shop workers £7.39 an hour, also said that its routine annual discussions about pay and benefits are taking place.

A Tesco spokeswoman said: 'We firmly believe in offering colleagues a total reward package and our benefits include a 10 per cent colleague discount, shares scheme and pension.'

Maureen Hinton, group research director at retail research agency Conlumino, said wages were a 'big topic' for the supermarkets.

'It's good for Lidl because it gives them a halo of corporate responsibility around this,' she told the Press Association.

Pay: Tesco and Morrisons are expected to announce wage increases amid strong competition in the sector

Hinton said that with a price war already raging between supermarkets in the battle for customers' business, their actions over staff wages were another way of giving them an edge from a marketing point of view.

Asked whether she thinks more supermarkets will make wage announcements, she said: 'Yes, I think it's definitely being discussed.'

The Living Wage Foundation recommends paying £7.85 outside London and £9.15 in London and will announce new rates at the start of November, which Lidl promised to match if they exceed the rates announced today.

Those rates are not to be confused with the Chancellor George Osborne's 'national living wage' announced in his July Budget. He increased the minimum wage of £6.50 an hour to £7.20 an hour from April, rising to more than £9 in 2020.

Costa Coffee and Premier Inn owner Whitbread and fashion retailer Next both recently warned they might have to ramp up its prices over the next few years in order to pay for the government's new living wage.

Government's living wage: Costa Coffee and Premier Inn owner Whitbread recently warned it might have to ramp up its prices over the next few years in order to pay for higher wage costs

But a recent study from the Resolution Foundation found that the national living wage will have modest impact on wage bills in most industries, although it also said that the impact would be much bigger for retail and hospitality as more workers are affected.

Lidl claims it will be the first British supermarket to adopt the higher rate being set by the Living Wage Foundation.

Ronny Gottschlich, chief executive of Lidl UK, said: ‘We recognise that every employee forms an integral part of team Lidl, and each individual's contribution is valued.

‘It's therefore only right that we show our commitment, in the same way that the team commit to the business and our customers each and every day, by ensuring a wage that supports the cost of living.’

Lidl, together with fellow discount chain Aldi, have grown fast over the past years to the disadvantage of the UK’s Big Four supermarkets Tesco, Sainsbury’s, Asda and Morrisons.

Lidl and Aldi’s combined market share grew to 9.7 per cent from 8.4 per cent in the 12 weeks to the end of August, according to Kantar Worldpanel figures.

Discounters have sparked a fierce price war among rivals as traditional supermarkets try to win back customers.

Since launching in the UK in 1994, Lidl has grown into a 620-strong chain across England, Scotland and Wales and made more than £4billion in sales over the last financial year.