At a time when many warehouse managers are struggling to recruit decent operatives, the costs of employing personnel are about to increase significantly. National insurance and minimum wage costs are rising from April 2025. These changes were announced by Chancellor Rachel Reeves in the recent UK Autumn Budget and it is going to make the business case for investing in warehouse automation even more compelling.
This article highlights what is going up and provides insights into constructing a compelling business case for warehouse automation technology, including Warehouse Management Systems (WMS) and wearable devices.
How are taxes going up in April 2025?
Increases to National Insurance costs
Employer’s Class 1, 1A and 1B National Insurance Contributions (NICs) are increasing by 1.2% from April 2025, bringing the rates to 15%. This is a tax levied against employers for their employees.
At the same time, Class 1 NIC secondary thresholds are reducing from £9,100 to £5,000 per annum. This is effective from 6 April 2025 until 5 April 2028. After this date it will then increase in line with CPI.
This change represents an increase of just under £900 Class 1 NIC per employee on an average worker’s total pay as published by the ONS on 1 October 2024.
Increases to Minimum Wage rates
In addition, the National Living Wage is increasing from April 2025. For over 21s, the rate of NLW is identical to the National Minimum Wage (NMW) and it increases from £11.44 to £12.21ph (6.7%) or £23,873.60 pa for a full-time worker. The 18–20-year-old rate increases from £8.60 to £10 (16.3%), up by £2,737 to £19,522 pa.
These cost increases will especially impact on warehouse managers who are employing workers at the lower end of the pay scale. When increases to both employer’s NICs and the NLW are considered together, this represents a very significant rise to the cost of employing warehousing operatives.
How can warehouse technology offset increases to tax?
These economic developments, together with the ongoing skills shortage, make the financial case for investing in warehouse automation – with a WMS and wearable mobile devices – even more compelling.
Let’s consider how to evaluate investing in these important technologies.
Evaluating the business case for wearables
In order to justify an investment in wearable technology, warehouse managers need to evaluate the potential return on investment (ROI). Here are some key considerations to build a business case:
- Cost vs benefit analysis: Wearables will usually involve a higher upfront cost compared to traditional handheld devices. This is because a business typically needs to purchase both the wearable computer and accessories like ring scanners and chargers. Plus, handheld devices are a mature technology and something of a commodity today. It is not helpful to do a direct cost comparison and instead, consider the time saved performing operations. For instance, studies suggest that wearable scanners can significantly boost productivity, enabling workers to pick up to 10 additional items per minute compared to handheld devices. These savings on labour costs can very quickly offset the higher initial outlay to purchase wearables.
- Productivity gains: When building a business case, it is essential to quantify the productivity gains. Research highlights that warehouses using wearables can pick orders up to 40% more quickly. That’s just one task of many to be performed each day. Consider the increased costs of employing warehouse workers and how by adopting tech to speed up throughput rates, these costs can be minimised.
- Longevity and durability: Ruggedised construction means that wearables are built to last in industrial environments. Many devices are designed to be future-proof, offering support for multiple Android generations with ongoing software updates to ensure security. This long lifespan can make wearables a very attractive investment over time. This consideration is not only important because the long useable lifespan enables these assets to be ‘sweated’ but it also aligns well with corporate sustainability goals.
- Security: Cybersecurity is one of the most serious threats to every business today. As the majority of new wearables are built for Android, users will benefit from the extra security this brings, as they are regularly updated with the latest security patches.
Developing a business case for a WMS investment
One of the most common observations new Indigo WMS users make when they start using the software is how it enables them to ‘do more with less’. What they mean specifically is that they can increase the volumes of orders and transactions their warehouse can process in a given period without having to increase headcount.
In addition to reducing labour costs, there are some other very significant business case considerations:
Improved inventory management. After personnel costs, stock is one of the big expenses for a business and it needs very careful management. A WMS will help optimise inventory management by preventing shortages and production delays.
Linked to stock management, a WMS enables you to track inventory levels in real time. This means you can operate a just in time warehouse, ordering in stock exactly when you need it to preserve cash flow.
Warehouse space is expensive to buy and even more so to rent and this trend will likely continue in the future. A WMS will allow you to optimise the way your warehouse is organised. Our experience shows that you can store up to 30% more stock in the same space when it is managed with a WMS. That is a huge space saving over the long term. The WMS will suggest where similar products can be stored and help operatives to locate items for an order quickly.
A successful WMS implementation, especially when operatives are using wearable devices, will quickly result in greater efficiency, productivity and accuracy in your warehouse. Considering the recent Budget announcement that employing workers is set to become even more expensive from April 2025, it is a great time to be building a business case. Let Indigo Software show you how.
https://www.indigo.co.uk
Disclaimer: This blog relates to the recent UK autumn budget 2024 and does not constitute tax advice. Tax law is complex so speak to your accountant about the relevance and appropriateness for your business.
