Novopay

Novopay is a web-based payroll system for state and state integrated schools in New Zealand, processing the pay of 110,000 teaching and support staff at 2,457 schools.Strained schools likely to get cash It was purchased by the New Zealand Ministry of Education for $182 million over ten years, and was implemented in August 2012 after seven years of planning and development by Australian human resources company Talent2. From the outset, the system led to widespread problems with over 8,000 teachers receiving the wrong pay and in some cases no pay at all; within a few months, 90% of schools were affected.

The 'Novopay debacle' as it was calledParata on Novopay: 'We are responsible' received almost daily media attention, causing embarrassment for the new Minister of Education Hekia Parata, and contributed to the resignation of newly recruited Education secretary Leslie Longstone.

In October 2014, Novopay transitioned to be 100% operated by the New Zealand Ministry of Education under current Minister Responsible for Novopay, Steven Joyce. Talent2 continues to provide the software but services and the accuracy of payroll is now the responsibility of the Ministry of Education through the government owned company, Education Payroll Ltd. Under the new arrangement the government assumes full responsibility for the provision of the education payroll service. They have since spent millions ($45M by 2015) in taxpayer funds fixing problems with the system.

The error rate for payments is now less than 0.2 per cent, less than half the 0.5 per cent acceptable error rate as defined by the Novopay technical review.

Talent2 background

Talent2 was started by two Australian entrepreneurs, Andrew Banks and Geoff Morgan. Banks and Morgan founded the Australian recruitment company Morgan and Banks in 1985. In 1994 the company was listed on the Australian stock exchange and sold four years later for $470 million.

Banks and Morgan launched Talent2 in 2003 focusing on recruitment and payroll management. The company grew rapidly and soon had 1700 staff in 19 countries and a turnover of more than $300 million a year. It claimed to have 2400 clients in the Asia Pacific region with more than 740,000 employees whose pay was managed by the company. The chief executive of Talent2 is John Rawlinson, a former physical education teacher. He has been at the head of the company from its incorporation.Novopay boss flies in ahead of announcement. New Zealand Herald. 31 January 2013.

During the period the Novopay contract was being negotiated with the Government, the company was having financial problemsRecruitment veterans Andrew Banks and Geoff Morgan to take listed recruiter Talent2 private and was later delisted from the Australian stock exchange.

The choice of Talent2

Prior to adopting Novopay, the payroll for 90,000 teachers and school staff nationwide had been managed for the Ministry of Education by Datacom Group. However, in February 2005, the Ministry of Education decided a new payroll system for teachers was required. Ministry documents reveal that the existing payroll service had been stable during the previous eight years, but was considered 'dated'; there was no on-line access and the system provided insufficient data to "support the more complex information and research needs of the Ministry". p.3

Datacom lost the contract to Talent 2, the creators of Novopay, in a competitive tender in 2005. Talent2 won the contract ahead of ten other tenderers.Ongoing friction revealed in Novopay fiasco. Dominion Post. 3 February 2013. The Novopay contract was initially signed off by the Labour Government in 2008. It was subsequently renegotiated by National twice.

Because of delays in the development of the programme, it was not until August 2012 that Novopay was finally rolled out. When Steven Joyce was appointed to sort out problems with Novopay in 2013, he initiated discussions with Datacom in case the contract with Talent2 had to be scrapped.Novopay: Testy relationship revealed. New Zealand Herald. 1 February 2013.

Payroll problems at NZ Post Talent2 was also selected to provide a new payroll system at New Zealand Post. The Australian company was awarded the NZ Post contract in 2010 to create a centralised payroll programme to replace the existing regional system. After it went live in 2011, thousands of NZ Post workers were also under-paid or over-paid.

EPMU national industry organiser Joe Gallagher described the new NZ Post payroll as a "dog" of a system and said: "We had workers overpaid, underpaid, not paid, you name it, we had it. We had instances where people got significantly large amounts and occasions where they were paid minus amounts." He said he was aware of team leaders "paying for their employees' groceries and petrol to cover pay problems, while others had faced the possibility of mortgage defaults." Given NZ Post's problems with Talent2, Mr Gallagher wondered why the company was awarded another Government contract. In fact, contract negotiations with the Ministry of Education appear to have begun long before the contract with NZ Post was signed – although NZ Post went live first.

NZ Post took Talent2 to task over the mistakes but the software had to be re-written and it took nearly two years before the system began to improve. Steven Joyce, who was subsequently tasked with sorting out problems with Novopay, said in January 2013 he was aware of NZ Post's payroll problems but could not yet comment on "the similarities or otherwise" between the two.

Implementation of Novopay in 2012

Delays in implementation Talent2 was originally awarded the multimillion-dollar contract by the Labour Government on the recommendation of Education Minister Trevor MallardNovopay errors revealed. New Zealand Herald. 1 February 2013. – but it was renegotiated twice by the subsequent National Government.Papers reveal Novopay nearly axed. Dominion Post. 2 February 2013. Once the contract was signed, Novopay was meant to go live in May 2010 but the company missed a number of deadlines which delayed the rollout by more than two years. Along the way, the Ministry of Education spent $650,000 trialling the system before it was rolled out nationally. More than half of the 731 trial-users felt they were not ready for the system to go live but the Government went ahead anyway.Govt spent more than $1m on consultants for Novopay system NZ Herald 20 December 2012

The system was last tested three months before it became operational, and revealed 147 software defects and made 6000 errors. TV3 reported that Education Minister Hekia Parata, Associate Education Minister Craig Foss and the Minister of Finance Bill English were all informed about the 'bugs' in the system but 'signed off on it anyway'. Four independent agencies – Pricewaterhouse Coopers, the Ministry of Social Development, the Primary Industries Ministry and the New Zealand Transport Agency – also all advised the system should go ahead.

Errors

In the first payround of the new system, 5000 school staff were underpaid (5.05%) and 15 were not paid at all. International auditors, Deloitte, recommends the error rate should be consistently below 1% in such systems.Editorial: Minister must put more heat on Novopay designers. New Zealand Herald. 25 March 2013. However, Novopay has been problematic on each successive payround with thousands of school staff finding discrepancies in their pay. Some teachers were getting paid too much, some not enough, and others nothing at all. One of the bugs in the system caused long or hyphenated names to appear twice in the payroll.Talent2 admits fault over Novopay

In the pay period 9 Jan 2013 through to 22 Jan 2013, $139 million was the total gross payroll, 176 were underpaid or not paid, giving an error rate of 0.29% according to the Ministry. This figure does not include teachers who were overpaid.

Concerns were raised that Novopay also committed breaches of privacy by giving teachers' personal information, including bank account details, to the wrong schools. A Manawatu school principal discovered that a glitch in Novopay allowed staff at a different school to change the pay details of one of his teachers. Opiki School principal Bede Gilmore said "the breach showed there was opportunity for fraud on a huge scale".Alarm as Novopay security breached. Manawatu Standard. 8 November 2012.

Many of the errors were described as 'bizarre'. One teacher was paid for 39 days, instead of 39 hours getting thousands of dollars more than he should have. Another teacher was overpaid by $39,000. She returned the money immediately, but two months later, had not been paid since. A relief teacher was paid for working at two different schools on the same day – one in Upper Hutt and the other in Auckland.Novopay problems: Teachers underpaid, overpaid, not paid Ashburton College principal, Grant McMillan, said the 'most ludicrous' problem was when "Novopay took $40,000 directly out of the school bank account to pay a number of teachers who had never worked at the college".Unforeseen issues caused by Novopay. Stuff. 27 January 2013. Another difficulty was the amount of time it was taking callers to get through to Talent2's helpline. When Gladstone School principal Margaret Hyslop called for assistance, she found she was 1,117th in the complaints queue.

The problems seem to compound with each successive payday upsetting school staff nationwide.Teachers disillusioned by ongoing payroll gaffes Only three months after Novopay was rolled out, the teachers' union, the NZEI, called for a public inquiry; NZEI National Secretary Paul Goulter said Novopay had been causing 'endless stress for schools and staff for months and needs to be fixed immediately'.NZEI demand Novopay inquiry By February 2013, over 14,000 teachers and school support staff14,470 teachers owed about $11.8m in wages. Stuff. 2 February 2013. were owed nearly $12 million in backpay because of all the mistakes. More than $600,000 had been overpaid to teachers by Novopay although about 80% has already been repaid.

In addition to the errors in their pay, school staff have had to spend hours entering additional data on the system to try and correct the mistakes. By February, the Ministry had received 225 invoices for extra administration costs (for which then Associate Education Minister Craig Foss had promised to compensate schools) totalling nearly $1.2 million. In November 2012, retail banks across New Zealand made the extraordinary step of offering school staff interest-free overdrafts after many employees missed out on being paid for up to four months.Novopay victims given free overdrafts

Five months after its implementation (mid-December 2012), a survey showed only 16% of schools had no errors that pay round, compared to 36% a month before, suggesting Novopay's performance was getting worse, rather than better. On 15 November the Ministry of Education said it would be taking legal action against Talent2, seeking financial compensation for the errors, which would be used to pay teachers.

At the start of 2015, the error rate for payments was less than 0.2 per cent, less than half the 0.5 per cent acceptable error rate as defined by the Novopay technical review.

Resignation of Leslie Longstone In November 2012, newly recruited education secretary, Leslie Longstone, said it could take a year to fix the system. However, as Minister of Education, Hekia Parata received most of the criticism for Novopay's failures. Parata reportedly fell out with Longstone – who subsequently resigned.Editorial: Parata lucky to stay after year of errors In 2013, it was revealed that Longstone received severance pay of $425,000 after only 13 months into her five-year appointment and had been paid $50,000 to relocate from Britain to New Zealand to take the job.Parata blasted over payout

Talent2's response