The supermarket group will pay its workers £8.50 an hour, above the £7.50 National Living Wage rate due to come into force in April, the BBC reports.
The “flexible” deal means Asda’s 135,000 staff can work around the store, on different days and hours.
Asda says signing is voluntary and it is not a zero hours contract.
However, it means that employees must work on bank holidays if the store needs them to, or, if they want to take the time off, it must come out of their 28 days of annual leave.
Additionally, all breaks will be unpaid and Asda will alter its night shift window. Currently, workers are paid an extra £2.04 for unsociable hours that run between 10.00pm and 6.00am.
Under the new agreement, unsociable hours will be cut to between midnight and 5.00am but the premium rate will rise to an additional £2.54 an hour.
The new contracts have been given the seal of approval by the GMB union.
Its general secretary, Tim Roache, said: “These new flexible contracts will help to ensure job security, ensure those accepting them are on the same terms and – best of all – ensure that people will earn more money as a result.
“The new contract offer involves quite a few changes, but as it’s voluntary, this allows colleagues to choose whatever suits their circumstances best.”
However, Living Wage Foundation, which campaigns for pay levels based on the cost of living, said that Asda should go further.
“This is a welcome pay rise for Asda’s staff, however large national retailers like Ikea, Lush and Majestic Wine are already paying all their staff – including third party contractors – the real Living Wage or above at £8.45 in the UK and £9.75 in London for every hour worked,” said Katherine Chapman, director of Living Wage Foundation.
“By signing up with the Living Wage Foundation they are ensuring that all their staff will have a pay rise that meets the rising cost of living year on year,” she said.
‘Fair and reasonable’
Asda, which is owned by US retail giant Walmart, claims that 95 per cent of its staff will be better off under the new deal, which will be introduced in October.
It said it was “maintaining its commitment not to use zero hours contracts and colleagues will be guaranteed minimum hours”.
Asda added: “Whilst the new contract will require colleagues to be flexible, fair and reasonable notice will be given for any changes to rotas, and consideration will be given to those with care requirements outside of work.”
The UK’s third-biggest supermarket chain, after Tesco and Sainsbury’s, has been struggling with declining sales. In the most recent quarter, over the Christmas period, it reported a 2.9 per cent fall in like-for-like sales.
However, the rate of decline in sales has slowed as it reported steeper drops in previous quarters.