Does Tesco pay living wage?

by Lois Neville

Writer at Breakroom

Tesco is the biggest and most well known supermarket in the UK. Already employing over 400,000 people, Tesco announced plans to hire even more workers earlier this year. 

So if you’ve been looking for a job, Tesco may already be on your radar. 

And big questions you may have about Tesco jobs could be things like: is the pay good and do they pay a living wage?

Here’s what we'll be looking into:

What is a ‘living wage’?

Before we get any further, it’s important to break down what we mean by a ‘living wage’.

Here are the key terms to understand about living wages and how they relate to the minimum wage.

How to understand the Government’s minimum wage

The Government sets the minimum wage for what people must legally be paid per hour. This varies depending on your age.

There are 4 age groups for the minimum wage. And these are divided into 2 groups, called the “National Minimum Wage” and the “National Living Wage”.

The age groups that come under the National Minimum Wage are:

  • Under 18

  • 18-20

  • 21-24

The National Living Wage covers people aged 25 and over.

To avoid confusion in this article, we’ll always refer to both the “National Minimum Wage” and the “National Living Wage” as “the minimum wage”. And where space is limited we’ll refer to the minimum wage as the MW.

So what’s the Real Living Wage?

The Real Living Wage (RLW) is an hourly rate of pay that has been calculated to take into account the real cost of living. It applies to all workers over 18. There’s a Real Living Wage for London, and one for the rest of the UK. 

It’s an accreditation scheme run by the Living Wage Foundation that employers can voluntarily sign up to. This pay rate isn’t set by the Government and employers have no legal requirement to use it.

We think it’s important to understand ‘a living wage’ as defined by the Real Living Wage, not by the National Living Wage. 

This is because the Real Living Wage has been calculated to cover how much it actually costs to live in the UK. This is not how the minimum wage has been calculated.

Why is living wage better than minimum wage?

The Real Living Wage is based on the actual cost of living, and is higher (and fairer).

To see why, let’s look at the percentage difference between the minimum wage and Real Living Wage.

Comparing the minimum wage to the Real Living Wage

Age group Minimum wage Real Living Wage % Increase of Real Living Wage over Minimum wage
Under 18 £4.55 Only applies to people 18 and over N/A
18–20 £6.45 £9.30 +44%
21–24 £8.20 £9.30 +13%
25 and over £8.72 £9.30 +7%

As you can see from the table, the gap between the minimum wage and the Real Living Wage becomes smaller when workers get older.

However, even for workers aged 25 or over, there’s still a 7% gap in pay. 

To put this into perspective, let’s look at the difference between a 25 year old full-time worker earning the minimum wage and the Real Living Wage*.

Yearly pay on the minimum wage:  £16,000

Yearly pay on the Real Living Wage: £17,000

*These are calculated on the basis of working 9-5, 5 days a week without a paid lunch hour.

This is a difference of £1000 a year.

The gap gets even bigger when looking at the Real Living Wage for London.

Age group Minimum wage Real Living Wage for London % Increase of Real Living Wage over Minimum wage
Under 18 £4.55 Only applies to people 18 and over N/A
18–20 £6.45 £10.75 +67%
21–24 £8.20 £10.75 +31%
25 and over £8.72 £10.75 +23%

Let’s look at the difference for the same 25 year old full-time worker:

Yearly pay on the minimum wage: £16,000

Yearly pay on Real Living Wage (London):  £19,500

This is a difference of £3500 a year!

What is Tesco’s hourly rate of pay?

Before we look at whether Tesco pays the close or near to the Real Living Wage, let’s first look at what they’re already paying their workers.

We’ve averaged Tesco pay rates across different job areas up. This is so we can have a clearer picture of how much each of these job areas pay.

Tesco job areas 25% of workers earn this or less 50% of workers earn this or less 75% of workers earn this or less
All Tesco jobs £9.00 £9.10 £10.00
Driving £9.68 £9.84 £10.50
Office £9.00 £9.92 £10.67
Store £9.00 £9.00 £9.50
Warehouse £9.10 £10.05 £11.14

Out of all of these job areas, store jobs pay the least. 

On average, all these Tesco job areas pay above the National Living Wage (remember, this is the Government set minimum wage for workers aged 25 and up.)

How much do Tesco managers earn?

Let’s take a look at the difference between managerial pay and pay for workers who aren’t managers:

25% of workers earn this or less 50% of workers earn this or less 75% of workers earn this or less
Manages people £10.26 £10.83 £11.45
Doesn’t manage people £9.00 £9.00 £9.71

Tesco manager jobs pay significantly more than jobs that don’t require people management. This makes sense. A job with more responsibilities should come with higher pay. 

Tesco manager roles on average pay more than the minimum wage, for every age group, and are also higher than the Real Living Wage.

So does Tesco pay as well as the Real Living Wage?

Now that we have looked at how much the different types of Tesco jobs pay, let’s see how Tesco pays per age group.

This is important, as the minimum wages are based on age groups. 

Firstly, let’s compare how much Tesco pays each age group alongside the respective legal minimums of pay per hour.

Tesco pay rates compared to the minimum wage

Age group Minimum wage Tesco average pay rate % Difference
Under 18 £4.55 £8.83 +94%
18–20 £6.45 £9.11 +41%
21–24 £8.20 £9.42 +14%
25 and over £8.72 £9.77 +12%

As you can see, the average hourly pay per age group exceeds the legal minimums. And the difference is bigger the younger you are.

Now let’s compare Tesco’s age based pay rates to the Real Living Wage.

Tesco pay rates compared to the Real Living Wage

Age group Real Living Wage Tesco average pay rate % Difference
Under 18 Only applies to people 18 and over £8.83 N/A
18–20 £9.30 £9.11 -3%
21–24 £9.30 £9.42 +1%
25 and over £9.30 £9.77 +5%

It’s clear from this table that the difference between Tesco’s average pay per hour and the Real Living Wage is far less striking than the difference with the minimum wage.

Only Tesco’s pay rates for workers aged 21 or older exceed the Real Living Wage, and only by a small amount.

Another important thing to remember is that the Real Living Wage for London is higher. This means that the difference between Tesco’s average pay rates and the London RLW is greater.

None of these average pay rates are more than or even equal to the Real Living Wage for London.

The Breakroom verdict on Tesco pay rates

When it comes to meeting legal minimum wage requirements, Tesco exceeds them. The younger you are, the more you are likely to earn over the minimum wage for your age group.

However, when reviewing Tesco pay rates against the Real Living Wage, they fall short. Remember, the RLW is calculated on the actual cost of living. And although managers do earn above the RLW, Tesco workers who don’t manage people do not.

The Real Living Wage is there to guide UK employers on how to fairly pay their workers. Tesco is yet to reach this point.

One of the things Tesco could improve their Breakroom rating is to pay their workers in line with the Real Living Wage. There are quite a few workers who have shared that the worst thing about their Tesco job is their pay rate.

Here’s what some of them have said:

Low pay for what is expected

Too much work not enough pay

All workers deserve to be paid a fair wage to cover the real cost of living, despite what their job role is.

Where to find out more information

Data used in this blog post is from 30 July 2020

Published on 12 August 2020