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As recession bites, Tesco affords UK workers pay advance

© Reuters. FILE PHOTO: A company logo is pictured outside a Tesco supermarket in Altrincham northern England, April 16, 2016. REUTERS/Phil Noble

By James Davey and Sarah Young

LONDON (Reuters) – Tesco (OTC:), one of Britain’s largest private-sector employers, is offering its staff advances on their pay in the latest sign of the distress arising from a worsening cost-of-living crisis.

Inflation has surged to a 41-year-high, driven up by rising energy bills and double-digit price hikes for food like milk, eggs and cheese, leaving many lower wage households facing tough choices this Christmas.

The labour market remains tight, however, and companies are raising hourly wages and offering one-off bonuses to attract and retain workers.

Under Tesco’s new scheme, 280,000 of its workers will be able to receive up to 25% of their contractual pay early if they pay a small fee.

Britain’s biggest supermarket chain said that would help staff avoid taking on expensive debt with high interest payments, such as pay day loans.

Many other European countries are grappling with high inflation, but Britain is the only Group of Seven nation yet to recover its pre-pandemic size.

According to the Resolution Foundation think tank, the poorest fifth of households in Britain are now more than 20% worse off than their peers in France and Germany.

With pay rises trailing inflation, there has been a wave of industrial action across sectors including railways, post and telecoms. Nurses are set to strike in the coming months.

To help staff cope while the economy flounders, some companies are offering workers extra help.

Retailer John Lewis Partnership said in September it would pay a one-off bonus of 500 pounds ($595) for full-time employees, while Marks & Spencer (OTC:) is offering an annual raise of 7.4%, a 250 pound voucher and benefits including free food and sanitary products.

Cleaning and property management company Mitie has offered about 60% of its 68,000 staff a “winter support package” comprising one-off bonuses, retail discounts and an option to borrow against future pay.

The country’s new monarch, King Charles, is also lending a hand, providing a bonus payment of 600 pounds for his staff earning less than 30,000 pounds, according to media reports.

Tesco, which has hiked hourly pay by nearly 8% this year, said employees would have to pay a 1.49 pound ($1.76) fee per advance to use its scheme.

“We hope this helps to support colleagues, particularly in the run up to Christmas,” Tesco’s UK people director James Goodman said.

Consumer spending expert Martin Lewis said salary advances were a safer option than pay day loans, but caution was needed.

“It’s very important to make a pact with yourself that if you’re going to do this you’ll only ever do it for real emergencies, he said on his Money Saving Expert website.

“Not new shoes, not a party you want to go to. And generally not for paying your bills.”

($1 = 0.8457 pounds)

($1 = 0.8410 pounds)

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