The Co-operative Group boss Shirine Khoury-Haq has said rumoured higher employer national insurance contributions will fuel costs as its wage bill surges.
Discussing a speculated increase in the tax in next week's Budget, she said the impact would be "significant" and in the "millions" of pounds.
This would come as real living wages are also set to rise once again, with the previous increase hiking the Co-op's wage bill by £100 million, according to Khoury-Haq.
The Living Wage Foundation unveiled a 60p increase in the real pay rate to £12.60 on Wednesday, with those in London set to be paid 70p more at £13.85 an hour.
Almost half a million workers at 15,000 employers signed up to the voluntary scheme are set for a pay increase as a result, with the charity's rate higher than the legal minimum wage of £11.44 an hour for adults.
“Low-paid workers have been hardest hit by the cost-of-living crisis and are still struggling to stay afloat,” Living Wage Foundation director Katherine Chapman said.
The charity added that 3.7 million low-paid workers were still struggling due to surging prices in recent years, as 42% had less than £10 left each week after covering essential expenses.
Khoury-Haq called on new government measures to be introduced in consultation with businesses.
“Please give as much advance warning as possible and work with business to be able to implement this in a considered way,” she said.
“For me as a business leader, I have to balance wanting to pay my colleagues absolutely fairly and linking pay to inflation as it should be with how we run our business and how we make sure that we can continue to maintain the profitability that we need.”