Tesco will lift pay for its store staff by 5.2% but will scrap the extra pay for working on Sunday.

The UK’s biggest supermarket chain said the hourly rate will go up by 43p to £12.45 from 30 March after reaching a deal with unions.

It will raise pay again to £12.64 from the end of August – a little above the UK national minimum wage which is set to rise to £12.21p per hour from April.

However, Tesco will also drop the current 10% pay bonus for Sunday shifts for all staff, which it had already stopped providing for new starters.

Tesco’s UK chief executive says the £180m spent on funding the pay increases is a “significant investment”.

The USDAW union said workers in London will see their pay rate increase to £13.66p per hour, and then £13.85p.

The changes come after discussions with the trade union, and Tesco said the two-phase increase will bring pay 5.2% above inflation.

USDAW’s Daniel Adams said the above-inflation raise “ensures a meaningful gap between the Tesco rates of pay and the National Living Wage in April”.

Tesco added that those effected by the scrapping of the Sunday pay bonus will receive a one-off payment, although it did not make clear how much the payment would be nor how it would be calculated.

The move comes as many big supermarkets raise pay to attract more staff in a tight labour market.

In January, Sainsbury’s said it will raise hourly pay by 5%, also in two phases, but said it was cautious about recruiting new staff in 2025 due to rising costs “to help manage a particularly tough cost inflation environment”.

The German-owned discount chain Lidl will also raise pay, it announced in February, from £12.40p per hour to £12.75p.

Chancellor Rachel Reeves announced in the October Budget that in April, along with the national minimum wage, employer National Insurance contributions will also rise.

Businesses have said the extra costs from these changes will mean higher prices, job cuts, and shop closures, though unions have criticised firms for saying this.