What capital budget can a business justify when replacing a single UK minimum wage employee with labelling automation?
Introduction
Labelling automation can deliver measurable savings and improved consistency. But how much should a business sensibly invest if the aim is to replace one full-time role — particularly a role paid at the UK National Living Wage?
This article sets out a practical baseline using today’s UK rates and a simple “12-month payback” approach.
Key Assumptions (kept deliberately simple)
- 1 full-time employee equivalent (40 hours/week, 52 weeks)
- National Living Wage (age 21+) = £12.21/hour
- Employer NI (Class 1 secondary) = 15% above the Secondary Threshold
- Auto-enrolment employer minimum = 3% of qualifying earnings
- Figures exclude overtime premiums, benefits in kind, training, recruitment, absence cover, etc.
The Labour Cost Baseline (Fully Loaded)
1) Gross pay
£12.21/hour × 2,080 hours
= £25,396.80
2) Employer National Insurance (2025/26 rules)
Secondary Threshold assumed (annual) = £5,000
Employer NI = 15% × (£25,396.80 − £5,000)
= 15% × £20,396.80
= £3,059.52
3) Employer pension (auto-enrolment minimum)
Qualifying earnings assumed = £25,396.80 − £6,240
= £19,156.80
Employer minimum (3%) = £574.70
Total annual employer cost (baseline)
£25,396.80 + £3,059.52 + £574.70
= £29,031.02 per year
A Simple 12-Month Payback Budget
If automation genuinely replaces one full-time role, then a practical “one-year payback” budget is approximately the fully loaded annual cost you’re removing:
Indicative 12-month payback budget: ~£29,000 (ex VAT)
Note on Tax Relief (Full Expensing / AIA)
Tax relief improves cashflow, but it doesn’t magically increase the “one-year payback” number if you’re comparing like-for-like deductible costs.
The clean takeaway: the most sensible first-pass budget is the fully loaded annual labour cost saved.
10-Year View (with modest wage inflation)
Assuming:
- 2% annual wage inflation
- The machine continues to remove 1 FTE worth of work each year
- No major breakdown costs
Using compound wage increases, the estimated 10-year cumulative labour cost avoided is:
~£318,000 gross labour cost avoided (10-year total, 2% inflation)
Less initial machine investment (~£29,000)
= ~£289,000 net gain over 10 years
And That’s Still Only the Direct Labour Comparison
- Absence risk and unplanned cover costs
- Training, supervision, and recruitment churn
- Variation in label placement, compliance, and presentation
- Manual handling and repetitive strain exposure
- Rework and waste from avoidable labelling errors
Choosing the Right Machine Matters
These numbers only hold if the system is genuinely suited to production reality:
- Robust enough to run year after year
- Minimal wear parts and simple maintenance
- Proven modules and repeatable control
- Support that resolves issues quickly when they arise
Conclusion
Replacing one full-time National Living Wage role with automation can justify a capital budget of roughly £29,000 for a 12-month payback, with a compelling multi-year return. Unlike labour cost, the investment is also reflected on the balance sheet: the machine is a fixed asset (PPE) that is depreciated over time and may retain a resale value. In other words, you’re not only reducing annual operating cost — you’re converting cash into productive equipment that can deliver value for many years.
Disclaimer
Figures are illustrative and simplified. Please confirm your own wage costs, pension basis, NI position (including Employment Allowance), tax profile, and operational assumptions with your accountant or advisor before making investment decisions.
