Why wasn’t school payroll simplified before Novopay?

Recently released findings from the Novopay Ministerial Inquiry highlight that there was no serious effort made by the Ministry of Education to simplify schools’ collective agreements or Ministry or school business processes before the start of the Novopay project. This was signalled in the inquiry report as being the “underlying cause of later problems.” And these later problems with the Novopay payroll system have of course been widely publicised, negatively affecting public trust and confidence in the Ministry and wider public sector, and tarnishing the reputation of Talent2, the payroll provider.

This situation then begs the obvious question – why didn’t the Ministry try and “fix” the
schools’ over-complicated payroll practices, processes and legislation before introducing the Novopay system?

There are 15 different national collective employment agreements in operation across the education sector as well as individual employment agreements. When you consider the variety of allowances, leave provisions and other employment conditions which impact pays, the number of possible permutations for individual pays has been estimated to be as high as 10,000. If the Ministry was serious about simplifying their payroll system, this would have been a great opportunity to clean up its act with regard to payroll rules and regulations before Novopay was implemented.

The past history of failed payroll system implementations further supports this argument. The Novopay Ministerial Inquiry detailed that every time the Ministry has tried to change its payroll system in the past, there have been major issues. In the mid-1980s a transfer from its own software to a new customised system caused blocks of staff to not get paid during the transition. When the Datacom system was introduced in 1996, the transfer again was very rocky. The project ran late, the implementation was difficult, and a contractor error eventuated in non-payments to all school employees who had been set up to be paid by direct credit.

With such a tumultuous past, and given the complex and exception-driven environment posed by the New Zealand school system, was it ever realistic that any payroll provider would have a chance of a successful implementation? Mark Neild, a computer industry professional commented that “Novopay’s botched
roll-out was a failure of management, not technology.”  Mr Neild explained that Novopay was a “classic project failure, but it was not the IT parts which failed.” Neild believes that the government wanted large changes in the school payroll system, including simpler national pay structures and for school staff to input their own data, but it was wrong to expect the software to achieve this. (radionz.co.nz, 15-6-2013)

Instead of rationalising the payroll system, “the Ministry progressed towards customising the Novopay service to reflect existing practices, rather than taking advantage of the inherent capabilities in the new software.” (Novopay Ministerial Inquiry) As the project morphed from implementing a configured-package software system towards a highly customised solution, this moved further and further away from the original strategy and business case argument. “More and more, the project was recreating the legacy processes and system…This approach had the effect of slowing the project down, constraining the benefits’ realisation and complicating relationships and future upgrade options.” (Novopay Ministerial Inquiry)

The inquiry report describes the school payroll environment as “overly complex as a result of an accumulation of historical changes.” Instead of being stuck in the past, it’s time the Ministry of Education takes a more forward-thinking approach by updating and simplifying their payroll, bringing the processes and requirements in line with Novopay’s simpler model (as was originally intended).

This has been endorsed by two of the Novopay Ministerial Inquiry recommendations to the Ministry – to engage with stakeholders including sector representatives, “to modernise the collective agreements in the sector in order to reduce the complexity they provide for the schools’ payroll” and to “re-examine the requirements of the current schools’ payroll to remove unnecessary practices and complexity” such as the single payslip, and start and end of year processes. (Novopay Ministerial Inquiry)

Steven Joyce, Minister Responsible for Novopay, has given assurances that he will action all of the inquiry’s recommendations – it’s just a shame that there was no foresight to do this during the nearly ten years of planning and development for the Novopay system.