In March, responsible investment NGO ShareAction coordinated a coalition of investors managing £2.2 trillion to file a shareholder resolution at Sainsbury’s PLC, calling for the company to become a Living Wage employer.

The company, which operates the UK’s second largest supermarket chain, has today responded by announcing that it will raise pay for employees in its outer London stores to £11.05 per hour. This means that all of Sainsbury’s 189,000 employees will now be paid at rates that at least match the current real Living Wage rates, set last November.

Sainsbury’s joins Aldi, Lidl, M&S and Waitrose, who also match current real Living Wage rates for all direct employees.

While this move is welcome, it fails to address other important issues that shareholders have highlighted with low pay at supermarkets.

Sainsbury’s has made no living wage commitment for the many workers on its sites that are employed via third-party contractors, such as security guards and cleaners. These are amongst the most vulnerable workers in the most insecure and low paid work. They are often described as ‘invisible’ due to not appearing in official company statistics despite being essential to businesses success.

Critically, Sainsbury's has made no commitment to ensure that pay continues to meet the sharply rising cost of living. The real Living Wage rate is calculated annually by the Resolution Foundation, using the most recent available data on the cost of living. It will be updated in November and Sainsbury's has made no commitment to match those new rates.

The shareholder resolution remains on the agenda for Sainsbury’s AGM, which will take place on 7th July.

Rachel Hargreaves, Senior Campaign Officer at ShareAction said: “We’re really pleased that Sainsbury’s plans to pay all its employees a real living wage. But investors want to see supermarkets become accredited Living Wage employers. This means ensuring that third-party contract staff working for them are also paid living wages and making an ongoing commitment not to let wage rates fall below the cost of living.”

Half of the FTSE 100 are now among over 9,500 accredited Living Wage employers, a group that also includes retail giant IKEA, but no supermarket has yet accredited. Despite official recognition of their status as ‘key workers’ during the pandemic, supermarket workers continue to be one of the largest groups of low paid workers in the UK.

Investors in the coalition are making the same ask of all UK supermarkets.

Despite its annual pay announcement yesterday, Tesco, the UK’s biggest supermarket, will pay staff in London £10.78 per hour, which falls below the £11.05 London Living Wage. Tesco staff outside London will be paid £10.10, just above today’s Real Living wage.

Angeli Benham, Senior Global ESG Manager, Legal and General Investment Management said: “Legal & General is thrilled for those employees that will now get a little extra help to meet their basic living needs. We also highly regard the board of Sainsbury’s for recognising their employees as being their greatest asset and treating them well at a time when they too are facing increased costs. This positive step to pay the real living wage to all of its employees is a definite demonstration of the value they place on their employees.

However, there is more to do. Today’s update falls short of the asks of ShareAction and the investor coalition, in that they only recommend to their suppliers that they should pay a fair wage. We continue to ask all companies to move on this and to pay the real living wage not only to their own employees but also to ensure parity for those employed by third party contractors working on their sites.”

Tracey Preece, Director of Finance at Joseph Rowntree Foundation said: “We’re delighted that Sainsbury’s has increased pay for workers in London, meaning all its directly employed staff are now paid at Living Wage rates. But we’d like to see the company become an accredited Living Wage employer, giving workers the certainty of living wages in years to come and crucially, extending this benefit to third party contractors such as cleaners and security guards.

We urge Sainsbury’s to seize the opportunity to become the first supermarket in the UK to commit to paying both directly and indirectly employed staff a real Living Wage. This is a vital step for the company to demonstrate its commitment to reducing poverty among its whole workforce and would set a new standard for others to follow.”