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Leaked Novopay Briefing To Minister: Text Version

Leaked Novopay Briefing To Minister: Text Version

The following is an automated text-recognition of the leaked briefing to the incoming Minister Steven Joyce on the Novopay system.

Note the scan contain multiple errors in the text and has not preserved formatting. Please refer to the original document (PDF).

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Briefing to the Incoming Minister

25 January 2013

Part One: Overview and upcoming decisions


The Novopay service is at a critical point. Too many staff have been underpaid, overpaid or not paid at all, and schools have lost confidence in the IT system and the service provided by Talent 2.

While the Ministry is confident that the IT system is robust and performs as expected, school users do not distinguish between the IT platform and the Service Experience – they just know that they are having to work harder than they used to, just to get their staff paid correctly.

The service delivery model used by Talent 2 is designed to operate with 90% online usage by school administrators. Online uptake plateaued at a little over 70% prior to the end of term four 2012.

In August when the Novopay system went live, there were significant issues with the user interface, with some critical school functions (like submitting timesheets for part-time teachers who also do casual relief teaching) not able to be completed online. Instead, schools were required to submit forms (by email). Because the Service Centre was not resourced to cope with this volume, a backlog of pay instructions (known as ‘tickets') was created.

While many of the issues that led to the manual forms have subsequently been resolved, the significant delays between submission and action - and some instructions never being resolved at all - led school administrators to lose confidence in the system. Consequently they have reverted back to a system they trust: complete a paper form, email it to Novopay, and keep a copy in a tile so that you can prove that you sent it.

This is labour intensive for schools, and further exacerbates the shortcomings in Talent 2's current service delivery model. However, before we can expect schools to return to online usage, we must demonstrate that the system is reliable, accurate and user friendly - we need to regain their confidence.

The New Zealand education payroll is one of the largest and most complex in Australasia. The schools payroll pays approximately 110,000 teaching and non-teaching staff at schools in the course of a year. These staff are covered by 15 separate collective agreements, resulting in approximately 10,000 possible pay variations.

The schools payroll is required to ensure that the teaching workforce is paid accurately according to qualifications and service against negotiated collective agreements. Under section 89 of the Education Act 1989 (the Act), the Ministry must ensure that facilities for servicing the payrolls of boards of trustees are established and maintained. Under section 91C of the Act, the Ministry must pay the salaries of teachers employed at schools and the salaries of non-teaching staff where the Board of Trustees elects to have these staff paid through the Education Service Payroll.

In practice, school boards must apply to the Secretary for Education if they wish to pay their own non-teaching staff, and very few schools have opted to do this.

Errors and Quality Assurance

10. The Novopay system is producing too many errors.

11. While some of this is due to outstanding programming defects, and large proportion of the issues that schools are experiencing stem from data entry errors at the Novopay Service Centre, which was never designed to process so many manual forms, and does not have robust quality assurance processes in place.

12. From an audit perspective, the quality assurance control comes from all instructions and forms being processed by Wednesday before pay day, so that the Draft Staff Usage and Expenditure report (SUE) can be checked by the school, and any errors picked up and reported back to Novopay for correction prior to the pay being run.

13. Because Talent 2 is rarely able to process all the instructions in time, the draft SUE reports are incomplete, and schools are not able to perform the quality assurance function effectively. They either ignore them completely, or resubmit their paperwork, compounding the processing bottle- neck at Talent 2.

Inadequate support and service delivery

14. The majority of Novopay users, who are school payroll administrators and principals, have found the change to Novopay difficult and frustrating. They have complained that Novopay has generated significant additional work and stress.

15. The support provided for Novopay users has been insufficient. The online training method used to prepare for implementation was not appropriate for all users. Since implementation, call centre wait times have often been unacceptably long. '

16. The majority of questions that schools actually have are more complex than the helpdesk staff are trained to answer. They frequently provide incorrect information. School users compare notes of their experiences with the helpdesk, and awareness that the advice is variable further exacerbates the lack of confidence that they have.

17. In addition, the helpdesk cannot see the same things that schools see (e.g. copies of their SUE reports), so cannot answer questions about them. Instead they have to take their contact details and arrange a call-back - which may or may not occur.

18. Complaints from schools suggest that emails from the help desk are hard to understand and often don’t address the issue the school was trying to resolve.

Regular Pay Performance and Rate of Improvement

19. Notwithstanding the issues above, Talent 2’s performance in processing a regular fortnightly pay has been improving. However the rate of improvement is so slow and incremental that it is virtually invisible to school users.

20. If we do nothing to change the users' experience, we can expect it to take 18 to 24 months before the Novopay system is delivering at the level that we expected - let alone being able to deliver genuine benehts to school users, such as making payroll easier to process and providing school principals and boards of trustees with valuable management information about their schools.

Our advice

21. For Novopay to deliver against the business case that was agreed and - more importantly - to provide a service that schools appreciate, afundamental re-design of the service delivery model is required. This will require:

o Negotiation of a contract variation with Talent 2; and

» injection of addition funding;

22. The contract with Talent 2 is supposed to deliver a fully outsourced service. This means that Talent 2 hold all the incentives. levers and management Infomation required to improve the service and make the operation as efficient as possible. In other words, the Mlnlstry has no say in how the service ls designed - lt only specifies the key performance indicators on which the service will be judged.

23. ln reality, this has never been fully implemented, and the Ministry has resumed control of some of the levers (such as the Novopay website, case management and complaints resolution) because Talent 2 lacked both the capacity and the capability to do so. Consequently the contractual levers available to the Ministry do not operate effectively, However it was untenable for the Ministry to ignore the issues that emerged after the service went live.

24. We expect that a variation to the contract would be lor a fixed term, would include greater input control for the Ministry. and provide a different set of penalties and incentives that better match the transition phase that we are ln. In particular, we would seek to ensure that improving user experience and satisfaction would be lncentlvised. We will need to monitor implementation very carefully to ensure that any additional money paid to Talent 2 achieves maximum value for money, given the justifiably high degree of public scrutiny that Novopay is receiving.

Upcoming decisions

25. We will seek agreement from you in the near future on:

~ The proposed contract variation and the associated tinancial implications

» Bringing fonivard elements of the proposed Enquiry - particularly issues that would provide confidence to the Education sector

~ Appointment of the independent Chair to head the Enquiry

Part Two: Plan to address the problems

26. While the structural changes to the service delivery model outlined in the previous section require a successful contract variation to be negotiated with Talent 2, there are a number of actions we will be taking immediately, and the broad shape of the necessary changes is relatively well understood.

Critical Actions for Start of Year (Next Two Weeks)

27. The payrun on 6 February -for pay period 23 -will be challenging because it is the start of the school year. The start of year pay run is always complex because it involves large numbers of staff changing schools and new staff coming onto the payroll. Even without a new payroll system, a high number of staff not being paid in the first pay of the school term would be expected. There were approximately 500 staff not included in the Start of Year pay in 2012.

28. This is compounded this year because there have been technical defects with the Start of Year screens in Novopay - requiring high numbers of manual forms to be submitted when the system won't accept the online data.

29. Media attention is high and schools' tolerance is low.

Quality Assurance for payroll reports

30. There are too many data entry errors occurring in the Talent 2 Pay Centre. This means that schools have to identify errors in their Draft SUE reports, and ihave a three hour window to submit changes and corrections.

31. To ensure the final SUE reports are more accurate, we have negotiated with Talent 2 to ensure strong quality assurance processes are in place before the draft SUE reports are produced.

Significant improvement at that point in the chain should produce more accurate final reports.

32. Talent 2 have increased the number of staff working on Quality Assurance and the Ministry will provide additional quality checks in the next week while errors can still be resolved.

Processing Capacity

33. Talent 2 does not have sufficient staff Mtn the experience and skills to process forms efficiently and correctly, within the required timelines for the pay period. This pay has a higher than usual volume of manual transactions that require data entry.

34. The Ministry has provided additional staff to Talent 2 for data entry including evenings and weekends.

35. This should help towards the production of accurate SUE reports for the next pay period.

Call centre capacity

36. We expect a major influx of calls during this pay period, particularly on Thursday 31 January when the Draft SUE reports are available, and again on Monday 4 February when the Final SUE reports are available. Talent 2 does not have sufhcient capacity to handle these calls and wait times are likely to become unacceptably long.

37. The Ministry will provide overflow call centre capacity on the days of peak volume.

Pro-active OIA release

38. On 30 January we will release responses to 40 requests made under the Official lnfomiation Act.

A further 15 sets of documents will be released pro~actively, Your office will be involved in checking the documents prior to release so that risks can be identified and mitigated, and communications activity planned.

39. We want to be open and transparent, and this will also enable us to reduce the number of staff dedicated to responding to Novopay O|As.


40. Communications to schools and the media will be proactive throughout this period.

Short Term Stabilisation (Four to Eight \Vceks)

41. Subject to successful negotiations with Talent 2, there will need to be a number of high impact (from the users' perspective) improvements delivered within a very short space of time.

Talent 2 New Zealand Management Resource

42. Talent 2 has no senior management bandwidth in New Zealand. This is significantly impeding Talent 2's ability to make decisions about resourcing, priorities and future improvements to the service.

43. We have identified a number of potential candidates by tapping into our networks (including PricewaterhouseCoopers and State Services Commission) which we will provide to Talent 2 with the expectation that they will appoint someone quickly.

Software defects

44. There is a backlog of software defects that require resolution.

45. Novopay went live with a number of known defects and temporary workarounds. This is normal in such projects. The problem is that new defects have continued to be found. Talent 2 has been unable to tix both the new detects and the known defects. Workarounds have been left in place instead of being replaced with permanent solutions, which has meant continuing extra work for staff in Talent 2 and the Ministry.

46. We are implementing the software defect mitigation plan agreed with Talent 2. This prioritises resolution in separate stages, or 'releases’.

47. At the same time, we expect the number of new defects to reduce as we pass through the start of year and go onto more "business as usual” pay periods.

48. Talent 2 ls struggling to maintain the pace of defect resolution, and there ls frequent slippage in the agreed timelines. We are likely to fund some additional resource for defect resolution so that progress can be maintained.

Call Centre capacity and capability

49. Call centre wait times have often been unacceptably long. Call centre staff have not always had the knowledge or experience to help callers.

50. We will build the number of skilled, experienced staff in the call centre. This will involve additional Ministry expenditure and Ministry “hands-on” involvement in improving processes in the call centre.

51. This requires Talent 2 to accept more Ministry involvement in their business. They have recently indicated that they are prepared to work with us on this.

Backlogs and Direct Enquiries

52. The Ministry has a backlog of over 1,100 enquiries made directly to us by school staff, including teachers and support staff. Only school payroll administrators are allowed to call the Call Centre, on behalf of an employee, and this has frustrated teaching and support staff. Relief teachers have been particularly poorly served because they often work at several schools and it is less clear which payroll administrator should call on their behalf. It was also an unsustainable model during the school holidays when school administrators were not available.

53. The Ministry set up an avenue for all school staff to send enquiries directly to us. This action was also prompted by a lack of information from Talent 2 as to how many errors and complaints there were. We had not anticipated we would receive such a large number of enquiries.

54. We have created a dedicated team to manage the direct enquiry process. We are also sourcing additional payroll experts who can work on resolving these.

55. When the capacity ofthe Novopay Service Desk is enhanced, we will be able to exit this process, which we are not well placed to provide (given that we are dependent on Talent 2 to actually resolve the issues).

First stage of the Enquiry into Novopay - software platform

56. There is a pressing need to give the sector confidence that the software platform for Novopay is sound. We believe it is, but the error rate has led to speculation that the platform needs to be replaced.

57. For this reason we will recommend that you bring forward the start date of the Enquiry and propose that, as the first stage of the Enquiry, your appoint an independent party to establish whether the IT platform is robust or not, and what the urgent issues are that need to be resolved.

58. This is the issue that the school sector has specifically asked be addressed quickly.

Regaining the Sector’s Confidence (Three to Six Months)

59. Once we have stabilised the service, we need to work hard to regain the sector's conndence - both in us and in Talent 2.

Improving the user experience/ including user feedback and voice

60. While we are resolving technical issues with reports and payslips as part of the defect resolution plan, schools and employees have raised justified issues with the reports they receive -that they are difficult (if not impossible) to interpret, contain high volumes of data that is not of any use, and that they take a lot longer to read and check than the previous ones.

61. School payroll administrators have also complained about the user interface. Many have made very sensible and constructive suggestions that would improve usable and reduce the time it takes to perform common tasks (such as the number of mouse clicks required to get to commonly used screens).

62. We plan to set up user focus groups. Their function will be to provide expert input and feedback.

The focus groups will be able to advise and work with us on amending these issues, and generally improving the experience that users have.

63. We also plan to provide case managers for some school payroll administrators. Not all will need this but we have recognised that some will need more personalised help that supports them from end to end - rather than different people processing different types of requests.


64. Once the Novopay service is stabilised and schools are becoming more confident, we will need to address the issue of compensation to schools for the additional work they have undertaken - and the stress that has been caused - by the issues with Novopay.

65. This would involve inviting the sector groups together to tell us what they think a suitable approach to compensation would be.

Monitoring user satisfaction

66. We need to keep track of how well Novopay is meeting the needs of schools.

67. One of the Key Performance Indicators (KPls) for Talent 2 is user satisfaction. However, Talent 2 do not currently have any means of assessing this,

68. We plan to survey users at regular intervals so that satisfaction can be tracked and measured.

The surveys will also empower the users by giving them a regular opportunity to influence the service they receive and provide their feedback.

Second stage of the Enquiry into Novopay

69. The full Review of Novopay will be underway during this period. This will build conhdence by demonstrating that the causes of the current situation are being investigated.

70. Stage Two will also need to include the Central Agencies technical requirements for a large ICT project Post-Implementation Review, however this will be only one element of a very broad enquiry into the implementation of Novopay.

Building Sector Capability (Six to 12 Months)

71. When schools are more confident that Novopay is a stable, robust and reliable service, we can start working with them to build their capability to use the online functionality, more advance functions and to become more knowledgeable about their obligations as employers (such as understanding the Collective Agreements).


72. We plan to design a better model for delivery of training and induction for school payroll administrators.

Collective Agreements

73. Novopay has uncovered, without being the direct cause, a lack of robust business knowledge and processes in some schools regarding the Collective Agreements.

74. Schools have been able to have considerable flexibility in the past and have not always acted in accordance with the Collective Agreements, particularly in relation to staff leave. However Novopay was built in business rules that are consistent with the Collective Agreements and prevents these practices.

75. Over the next 18 months we will develop a plan to address this and start implementation.

Segmentation of capability

76. The sector is not uniform in its response to Novopay.

77. A large number of schools are managing well independently. These schools are processing their entire payroll online with almost no problems.

78. Another segment requires a significant investment in building trust and capability before it can reach the stage of independence.

79. There will also be an ongoing need for support for the sector due to turnover in school payroll administrators.

80. We will develop an approach for each segment, and gradually move schools to more confident and advanced use of the system.

Further advice

81. We will provide you with a Dashboard Report of critical data and information on Novopay performance three times each week.

82. We will provide you with a fortnightly summary of each pay cycle (this will be on the Thursday after the pay ~ so the first report will be Thursday 7 February).

83. We will keep you updated regularly on the progress of negotiations with Talent 2.

84. We will provide you with further advice on the proposed contract variation, and the tinancial implications of this, in early February.

85. We will also provide advice about the Novopay Enquiry, and the appointment of an independent Chair to lead this review in early February.


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