LONDON (Reuters) -British supermarket group Sainsbury's said on Wednesday it would raise pay for its 127,000 hourly paid workers to at least 11 pounds ($13.24) an hour from February as it looks to attract and retain staff in a tight labour market.
Britain's second largest grocer after Tesco, and one of the country's biggest private sector employers, said the pay of Sainsbury’s and Argos retail workers would increase from 10.25 pounds to 11.00 pounds per hour outside of London, and from 11.30 pounds to 11.95 pounds per hour in the capital.
Sainsbury's said the latest rise takes the increase for frontline, hourly paid staff to 10% in the last year and 38% over six years.
Inflation in Britain is running at 10.7% and the Bank of England is watching pay settlements closely as it mulls further rises in interest rates.
The government mandated National Living Wage will rise to 10.42 pounds an hour from April, an increase of 9.7%.
Sainsbury's said the latest pay hike would cost it 185 million pounds ($223 million) and follows a 20 million pounds investment in October. It will be financed by cost savings in other areas of the business.
The group has also extended free food during shifts for store and depot staff by a further six months, and is also increasing staff discounts at Argos.
"We are acutely aware of how tough things are for millions of households this winter and we know that particularly after Christmas, budgets will be tighter than ever," Sainsbury's CEO Simon Roberts said.
In November, market leader Tesco increased the basic hourly rate of pay for its store staff by 20 pence to 10.30 pounds or 10.98 pounds in London, taking the 2022 increase to nearly 8%.
Sainsbury's is due to update on Christmas trading on Jan. 11.
Shares in the group were up 4.4% in afternoon trading after data from market researcher Kantar showed it had performed solidly in December.
($1 = 0.8302 pounds)
(Reporting by James Davey Editing by Michael Holden and Mark Potter)