Authorities who raided one of the company’s warehouses discovered that the students, of almost a dozen nationalities, were working significantly longer hours than their visas allowed.
UK Border Agency (UKBA) officials arrested more than 30 of the students. Britain’s biggest supermarket was fined for breaking employment rules in its use of 23 workers.
The penalty follows Home Office operations to put a stop to “visa abuse”. A UKBA spokesman said the fine shows it “will not hesitate to take action against employers that break the rules”.
The disclosures will prove embarrassing to Tesco, which employs nearly 300,000 people across more than 2,500 stores in Britain.
UKBA officials decided against revoking any of the retailer’s licences “because they wanted to work with Tesco to solve the problem”, sources said.
Officials had discovered the students, who all had the right to work in the UK, had been working up to three-and-a-half times longer than their visas allowed.
Tesco said it has taken steps to ensure “an incident of this nature does not happen again”.
Separately, the management overhaul at Tesco continued on Tuesday with the departure of the executive in charge of the retail giant’s non-food business in the UK.
After just 18 months in the job, Terry Price, a former Wal-Mart executive, is to leave following the lacklustre performance of the division.
Neela Mukherjee, who runs Tesco’s online non-food business, will replace him by combining the role with her current duties.