Dave Lewis warns Tesco staff could face employee benefits cuts over living wage

Lewis said he is already talking to trade unions about how the grocer will handle the cost of implementing the Government’s living wage. Tesco already pays on average above the living wage rate of £7.20, which will take effect next April.

“We are in negotiation with trade unions now about how we might develop this going forward and whether we give the option to colleagues to decide whether they want the benefits or they want the cash, given whatever their life circumstances are,” he told the IGD conference in London yesterday.

At the conference Lewis appeared angered that the debate had become so focused on the hourly rate. He said: “We are supporters of the hourly rate and in a sense you could say ‘what’s your problem’. But I very, very strongly refuse to accept that this is just a debate about what the hourly rate is.

“I’ve talked to loads of colleagues and these benefits are hugely important (to them). When I monetise the benefits outside of London it’s already about £8.80.”

George Osborne’s surprise announcement of plans for a so-called ‘living wage’ means the minimum wage for over 25s could reach £9 an hour by 2020.

Lewis said the change will cost Tesco up to £500m.

He added: “We want a full relationship with our colleagues and we’ll not just strip it down to an hourly rate which will potentially mis-represent the industry.”

Rival Morrisons announced last month it planned to raise its basic pay rate to £8.20 an hour. And discounter Lidl last week hiked its minimum pay to £8.20 an hour, and £9.35 an hour in London, which is above the actual living wage called for by campaigners.