March 6, 2018 / 2:01 PM / 3 months ago

UPDATE 1-UK's Sainsbury's raises in-store pay but axes paid breaks

* Plans rise in base pay for in-store staff

* To remove paid breaks and staff bonus

* To finance 100 mln stg cost from savings (Adds detail, spokeswoman comment, shares)

LONDON, March 6 (Reuters) - Sainsbury’s, Britain’s second largest supermarket group, plans to increase the base rate of pay for staff working in stores but stop paid breaks and an annual bonus, in a move it said would leave most staff better off.

Sainsbury’s employs 195,000 in Britain and Ireland and is the UK’s second biggest private sector employer after rival Tesco.

It said on Tuesday it would spend an extra 100 million pounds ($139 million) on a plan that would also simplify the number of in-store roles from 22 to five.

Sainsbury’s, which also owns the Argos chain, said it would finance the pay increase through an ongoing cost savings programme within the business.

All of Britain’s big four food grocers - Tesco, Sainsbury’s, Asda and Morrisons - are seeking cost savings to keep prices down so they can better compete with discounters Aldi and Lidl, which are still winning market share.

Under Sainsbury’s proposals, which are subject to employee consultation, the base rate of pay would rise from 8 pounds an hour to 9.20 pounds from September this year. Staff in inner London would be paid 9.80 an hour.

However, payment for breaks and an annual discretionary staff bonus would be removed.

A new contract for all 130,000 in-store staff, regardless of age or length of service, would also be introduced.

A spokeswoman for Sainsbury’s said a typical in-store staff member would see their annual pay rise 8.4 percent to 17,581 pounds for 36.75 hours per week from 16,224 pounds for 39 hours currently.

Sainsbury’s said “a small proportion” of employees could be adversely impacted by its proposals. It said it would make top-up payments for 18 months to ensure no employees earn less than they do currently over that period.

Market leader Tesco’s basic hourly rate is currently 8.02 pounds, increasing in July to 8.18 pounds and in November to 8.42 pounds. It retains a staff bonus plan but does not pay for breaks.

Sainsbury’s said in November it expected to achieve cost savings of 540 million pounds in its 2017-18 financial year and was targeting “at least” another 500 million pounds in savings over the three years starting in 2018-19.

In January, Sainsbury’s announced a restructuring of its store management.

Separately on Tuesday industry data showed Sainsbury’s was the worst performer of the “big four” in the 12 weeks to Feb. 25.

Sainsbury’s has reported three straight years of falling profit and analysts are forecasting a fourth.

Shares in Sainsbury’s were down 1.8 percent at 1313 GMT.

$1 = 0.7231 pounds Reporting by James Davey and Kate Holton Editing by Mark Potter

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