From April, staff will be paid £11.02 an hour outside London, up from £10.30, with more than 200,000 set to benefit.
As in other industries, supermarket staff have been pushing for higher pay as the cost of living rises at its fastest rate in almost four decades.
Other supermarkets including Asda, Aldi and Lidl have also put up wages.
Jason Tarry, chief commercial officer of Tesco UK, said the latest increase recognised the “incredible work and dedication” of Tesco workers.
“We know that many colleagues have felt the pressure of rising costs this year, and we are absolutely committed to supporting them with competitive base pay and exclusive colleague benefits,” he added.
Daniel Adams, national officer at the union Usdaw, which helped broker the deal said it was a “significant step forward for pay within Tesco retail”.
“The business continues to respond positively to the significant pressures our members face,” he said.
Tesco said its latest pay rise represented a 7% increase in base pay, and was its “biggest ever investment” in hourly wages.
Over the past 10 months the retailer has boosted staff pay by some 15.5%, according to Usdaw.
The new rates apply to staff of all ages and exceed the statutory minimum wage, or “national living wage”, which stands at £9.50 an hour and is increasing to £10.42 an hour from April for those aged 23 and over.
The grocer will also pay more than the Living Wage Foundation’s voluntary rate outside London of £10.90, while matching its £11.95 rate in the capital.
It follows similar pay increases at other major supermarkets, many of which are finding it hard to recruit and retain workers.
- Earlier this month Asda announced it would raise the pay of 115,000 workers by 10%, taking rates to £11.11 an hour outside London.
- In January, Aldi began paying a minimum of £11 an hour at its stores nationally, and £12.45 in London. It also boosted wages at its warehouses by 20% in February.
- Lidl has increased entry level pay to £10.90 an hour outside London and £11.95 within the M25.
Tesco’s plans come a month after it announced it would cut 1,750 team manager posts across its larger stores, while closing roles elsewhere.
It said a new tier of 1,800 lower paid shift leader positions would take over running its shop floors.
