The school payroll system will be under Government management from 17 October 2014, following a mutual agreement between the Ministry of Education and Talent2, the existing school payroll provider.

Following lengthy negotiations, an agreement has been settled on the Novopay remediation costs payable by Talent2, and the development of the new operating model for the school payroll system.

The new Government-owned company will take over responsibility for payroll processing and service centre activities, and customisations of the software.

Steven Joyce, Minister Responsible for Novopay, says that the Ministry of Education and Talent2 came to a mutual agreement.

“This decision has been made in the best interests of all parties: staff, administrators, schools, and the Government,” he says.

“It became the logical next step towards giving schools a more stable, sustainable and simple payroll service.”

He says that there has been considerable effort made by both parties to stabilise and improve Novopay since its ‘Go Live’ in August 2012.

Joyce adds that the 0.5% acceptable steady state error rate has remained over the past 15 months, apart from the three ‘start of year’ payroll cycles this year.

"However further changes are required to the system and the service model to make the system easier to operate for school administrators,” he says.

“On top of that, keeping the system performing at its current level under the current operating model has remained very expensive for both taxpayers and the payroll provider.

“Talent2 was not prepared to provide the extra resources that are necessary for further development of the system within the current contractual arrangements."

Under the new arrangement, a new government-owned company will take over the operation of the payroll service. Talent2 is licensing the core Alesco software to the new company.

Settlement involves Talent2 paying the Ministry of Education between $18 and $22 million, inclusive of $7 million in cash, a license for the Alesco software and discounted fees for software support and maintenance.

Customisations of the Novopay software, valued between $15 and $18 million by Talent2 and previously funded by the Ministry of Education through the Novopay contract, will be fully owned by the Ministry.

Joyce says that decision follows the key recommendation from the 2013 Ministerial Inquiry into Novopay to re-examine and re-negotiate the contract.

He says that in addition to continuing the work on the substantial improvement programme that is already underway, the school payroll system will be simplified.

“In the meantime, current service levels and staffing will be maintained throughout the transition with the full support of Talent2. Talent2 will retain operational responsibility during the transition and has committed to working closely with the Ministry to make the transfer as smooth as possible.”

“These changes are a very important next step in completing the work to remediate the school payroll. They will lead to a high quality sustainable payroll operation.”

It is intended that the 90 Talent2 staff based in Wellington and Christchurch will continue to work from their current locations.