BT has given 58,000 workers a £1,500 pay rise that it says is its biggest award in two decades, despite its largest union rejecting the deal and saying it intends to ballot members over strike action. Last week BT had a £1,200 pay rise offer rejected by the Communication Workers Union (CWU), which represents about 40,000 of the company’s 100,000 employees, with union bosses describing it as “insulting” and a “relative pay cut” as soaring inflation fuels a cost of living crisis. The CWU has been pushing for a 10% rise at BT in the face of rampant inflation, currently at 6.2%, which the Bank of England forecast could peak at 10% by the end of the year. On Thursday, the union rejected the improved award and said that it would now immediately prepare for a statutory industrial action ballot. BT said the flat-rate pay rise – mostly benefiting its lowest-paid staff – worked out as a rise of between 3% and 8%. It has been backdated to 1 April to coincide with households being hit by multiple price increases, from council tax and VAT on hospitality to broadband and phone bills, and will cost BT about £90m. “While we have continued to extend and strengthen our networks to support the country’s recovery, the pandemic has hit our financial performance, like that of most companies,” said Philip Jansen, the chief executive of BT. “We know that the cost of living continues to rise and by making this award we’re ensuring that our lower-paid workers will benefit most and as soon as possible.” Companies across the UK are holding talks over pay amid rising inflation. On Thursday the supermarket Tesco announced the second pay rise for shop and warehouse workers in a year. On Friday, Sainsbury’s is expected to raise pay for workers in its supermarkets and Argos stores in outer London by 55p an hour so that they will receive the London living wage of £11.05. The improvement makes Sainsbury’s the first supermarket group to pay all its workers above the independently verified living wage after pressure from investors. Sainsbury’s staff in inner London already receive £11.05 an hour after a pay rise last month while those outside the capital receive at least £10 an hour, slightly above the living wage target. The staff receiving the pay rise at BT are mainly those who work at its retail stores, engineers who work at its Openreach subsidiary, and call centre employees, all of whom are based in the UK. BT said talks with Prospect, the union that represents manager-level staff among the 42,000 who have not received a pay award, would commence soon. About 83,000 of BT’s total 100,000 workforce are based in the UK. Last year BT awarded 59,000 frontline workers a special bonus of £1,500 in recognition of their work during the coronavirus pandemic. This comprised a £1,000 cash bonus and £500 in shares, which will be awarded after three years as part of the employee share scheme. The bonus award cost BT about £110m, and the company said the payments represented about 5% of the average employee’s salary. Tesco said on Thursday it was investing £200m to raise its minimum hourly rate of pay by 5.8% to £10.10 from 24 July 2022, the biggest single-year investment in hourly pay for shop and warehouse workers at the UK’s largest supermarket chain in at least a decade. Under the deal agreed with the Usdaw union, some shopping delivery drivers, who currently receive £9.55 an hour, will receive an extra 90p an hour from 1 May, taking their hourly rate to £11.00 from 24 July 2022. The latest pay rise at Tesco comes only seven months after it increased wages for its lowest-paid workers by 2.7% to £9.55 an hour. The new deal has been agreed after Tesco became the lowest-paying supermarket in the UK, with Sainsbury’s, Morrisons, Aldi and Lidl all offering £10 an hour or more, while Asda began paying £9.66 an hour from this month. Businesses are being forced to push through significant pay increases as workers struggle with heavy inflation on the cost of living, and there is heavy competition for suitable staff.