Britain's biggest retailer, Tesco, will raise hourly pay for about 220,000 store workers by 7% from April, another increase that will likely catch the attention of the Bank of England, which is worried about inflationary pressure in the economy.
The supermarket group, one of the country's largest private sector employers, said a deal agreed with shop workers union USDAW will see store workers get £11.02 ($13.25) an hour from 2 April, up from £10.30 currently.
Workers in inner and outer London will get additional allowances.
Tesco said the increase, a third in ten months, will cost it over £230 million and take investment in pay over the last year to £430 million.
On Friday, Asda, Britain's No. 3 supermarket chain, announced a 10% pay rise for its staff. No. 2 Sainsbury's announced an increase in January.
BoE Watching Pay Settlements
The BoE is watching pay settlements closely as it mulls further rises in interest rates.
BoE Governor Andrew Bailey earlier this month expressed concerns about wage-setting, despite signs that the surge in inflation - which hit 11.1% in October before falling to 10.1% in January - had turned a corner.
Tesco said the latest rise reflects the accelerating cost of living its workers are facing.
But it also likely reflects Britain's still tight labour market. Data this month showed that despite being on the brink of recession, the country's jobless rate held close to five-decade lows and employment grew.
The government-mandated National Living Wage will rise to £10.42 an hour from April, an increase of 9.7%.
Tesco said it will also continue to provide staff with free food in store canteens, a salary advance scheme and a discount of up to £1,500 a year off their shopping.
Premiums for Sunday working will, however, be cut from 25% to 17%.