The Novopay nightmare – when will it end?

December 2013

 

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The Ministry of Education’s troubled payroll system is allegedly on the mend, but at what cost? JUDE BARBACK reflects on Novopay’s painful journey so far.

A year ago, Novopay was making headlines for the sheer number of errors being made in teachers’ pay. Stories emerged from every corner of

New Zealand of teachers being underpaid, overpaid, or not paid at all. There were tales of trained teachers paid as untrained teachers, staff paid for work completed at the wrong school, full-timers paid as part-timers, and so on.

Now, a year on, the question has to be asked whether we are any closer to putting the Novopay nightmare behind us.

One would certainly hope so. There has been a Ministerial Inquiry, senior jobs lost at the Ministry of Education, and an enormous amount of time, money, and energy spent on fixing the beleaguered payroll system.

Life before Novopay: a simpler time

Prior to its implementation, Novopay was flaunted as a 21st century payroll system with many benefits. It was proposed to reduce the amount of time spent by schools on managing their payroll and increasing the accuracy of pay for staff. Many schools looked forward to the promise of features such as the ability to easily change personal bank account details, tax codes, and email addresses in a seemingly streamlined digital process.

Plans for Novopay to replace the previous payroll system began years ago, with information released to schools at the beginning of 2009, with an intention to roll out the system by mid-2010.

However, the Ministry released a review in November 2010, explaining that the delay for the implementation of the Novopay service was to “ensure that the system has been fully tailored to meet the complex needs of the [old] payroll and to allow sufficient time for extensive and robust testing to take place”.

Given the volume of problems that have since ensued, it would appear that more time was needed. Or perhaps a different system should have been considered. Of course, what we now know, with the benefit of hindsight and the Ministerial Inquiry, is that these alternative paths are exactly what certain Ministry officials knew should be taken … yet they proceeded with Plan A regardless.

When did it all start to go wrong?

Publicly, the Novopay nightmare began when it was launched in August 2012 and the mistakes began. However, since the Inquiry, we now know that warning bells had been ringing in certain Ministry ears for a long time prior to the launch.

When the collective roar of disgruntled principals and teachers was eventually heard in the Beehive, action was finally taken. In January this year, Craig Foss lost his role as associate minister for education in a cabinet reshuffle and Steven Joyce, dubbed ‘minister of everything’, added Novopay to his portfolio. A Ministerial Inquiry into Novopay began shortly thereafter.

The Inquiry, carried out by Sir Maarten Wevers and Deloitte chairman Murray Jack, discovered that Ministry staff advised the launch of Novopay in spite of knowledge that the system was not yet functioning adequately.

“The go live decision was confirmed even though it was clear that not all testing had been completed,” reads the report. “The service centre had failed some of its test and was not fully ready.”

The report found the State Services Commission did not conduct its monitoring role properly and the Government chief information officer was not involved to the level he should have been. The role of the Government chief information officer has since been expanded as a result.

Heads roll

The inquiry report also found that “Ministers were not always well serviced” and that reporting to ministers was “inconsistent”, “unduly optimistic”, and most damningly for those involved, “sometimes misrepresented the situation”.

A memo in April 2012 from the Ministry of Education’s chief information officer Leanne Gibson provides an example of this. It gave detailed problems with the development of Novopay, and recommended options including terminating elements of provider Talent2’s contract and moving to a hybrid system incorporating Novopay and the previous Datacom system.

A further paper from Gibson in June 2012 recommended proceeding with the system but stated there were 147 software defects which hadn’t been solved. Testing also revealed 6000 errors.

Choosing to run with a less-than-perfect system proved to be catastrophic for some. Two senior Ministry of Education staff members resigned over the findings of the Inquiry. Their resignation followed that of former Secretary for Education Lesley Longstone who also resigned during the course of the Novopay fray.

Why? Why did those in the Ministry plough on with their advice to launch Novopay, even though they knew it wasn’t ready to go? Did an element of “she’ll be right” underpin the green light to the Ministers? Clearly they were under pressure to deliver on this – after all, it had been years in the making and already delayed and delayed. And of course, they couldn’t have foreseen the extent of the damage the system could do to the education sector.

Teachers fight back

Secretary for Education Peter Hughes has taken the findings on the chin, saying in his foreword of the Ministry’s annual report that he fully accepts the findings and recommendations of the Inquiry, and that as a result, “leadership changes have been made, including the establishment of a dedicated Ministry group to give the Novopay service the focus and resource it needs”.

“We’ve been fixing the issues with Novopay, and we are making steady progress.”

It may indeed be steady progress, and Minister Joyce did warn that it could be up to two years before the system was completely fixed, however, it appears to be taking too long for many teachers.

Some teachers are showing their mistrust and disdain in their slowness to repay money that has been overpaid to them via Novopay. The Ministry of Education revealed that it is still chasing thousands of school staff for $10.4 million in overpayments resulting from Novopay blunders.

Over 15,000 overpayments have been made totalling $13.6 million, of which approximately $3.1m has been recovered so far. While the Government hasn’t ruled out the use of debt collectors, Minister Joyce says they are prepared to be “generous about the timing and the process”.

The reluctance of some teachers to pay back the payments is in part due to the fact that problems still persist with Novopay.

The Post Primary Teachers Association’s (PPTA) Blackout day in September revealed that many teachers are still experiencing problems with their pay.

“In the same week we hear that the backlog is gone, the Ministry released statistics showing that as at 30 August, 9487 pay and service issues were still being dealt with by their soon-to-be closed backlog clearance unit,” said PPTA president Angela Roberts in her speech at the union’s 2013 annual conference.

The PPTA have staunchly contested Novopay. In February this year, shortly after the Inquiry began, and just as teachers, fresh from their holidays, were subjected to more payslip blunders, the union launched group legal action over Novopay mispayments. The action, filed in the High Court at Wellington in June, was against Secretary for Education Peter Hughes for failing in his statutory duty to pay teachers.

“We need justice for members and PPTA must ensure there is no repeat of the Novopay omnishambles ever again,” said Roberts.

The PPTA’s submission into the Novopay inquiry said that they felt there was “a dismissive view taken of stakeholder input” and that “the focus seems to have been on cost effectiveness at the price of relationships”. They felt the Novopay system left no room for any personalised relationships, despite the devolved nature of New Zealand’s school system, where many small and isolated schools need support.

“It is easy to see the appeal for Talent2 of a system that replaced expensive employees with software and free data entry at the school level but it is hard to understand why Ministry officials couldn’t see the risk in such an optimistic expectation. How has the Ministry of Education become so unfamiliar with the day-to-day operations of schools?” read the union’s submission.

Millions at stake

Novopay was indeed supposed to be a cost saving exercise – but it has ended up costing millions more than expected.

Reports reveal the system cost just under $30 million to develop and then another $20 million to date has been spent on trying to fix it. In March, schools received $6 million in compensation for extra hours spent administering Novopay, and now the Government intends to spend another $6 million on technical support and training to ensure school payroll runs smoothly for the end of year/start of year process.

The extra end of year/start of year funding comes from the $8 million contingency set aside in Budget 2013 to ensure the stability of the payroll system.

The Ministry of Education says it will enter into contractual discussions with Talent2 once Novopay is stable and they know how much has been spent on bringing the payroll system up to standard since it went live in August last year.

Minister Joyce has made clear that the focus is on fixing Novopay as soon as possible and that the issue of who pays what in relation to the additional costs and remediation will be settled at the end of the remediation process.

Talent2 has been rather quiet throughout the whole debacle. The public are largely in the dark about the details of the 10-year contract with the Australian company. In November last year, chief executive John Rawlinson revealed that the company was aware of the challenges Novopay could present when they took on the contract with the Ministry of Education.

“We knew the job was dangerous when we took it,” Rawlinson told NBR, but also suggests the Ministry moved the goalposts, too.

He cited the complexities involved in customising the system as reason for the significant delays in getting it up and running but there is no clear explanation for the glitches in the system. Of course, part of the initial problem was the lack of training; Rawlinson says “sector readiness” was the Ministry’s responsibility.

At the end of the day, blame sharing and finger pointing are not going to resolve the problem, and it is a good thing Joyce is so doggedly pursuing an end to the fiasco.

Joyce is also focused on the long term. Based on the recommendation of the Ministerial Inquiry, he says work needs to be done to examine the school payroll service delivery model to make sure it is sustainable and affordable.

“While good progress has been made in remediating Novopay, there is still a lot to do in the months ahead to maintain the stability that has been achieved and ensure the payroll system performs to expectations.”


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