Future of Education Payroll in NZ: Lessons from Novapay and the Path Ahead

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The New Zealand Ministry of Education and Education Payroll Limited (EPL) are proactively exploring future solutions in preparation for the existing payroll services agreement ending in June 2027.

The two groups have begun a thorough evaluation of the various payroll options available on the market as part of the Future Schools and Kura Payroll Programme. The results of this early research will be used to build a compelling business case for either continuing with the current setup, using the Novapay solution, or transitioning to a new one.

The Ministry of Education distributes roughly $6.5 billion yearly to New Zealand’s 2,500 schools and 100,000 educators in the country’s education industry. The specific payroll rules of the New Zealand school industry add another significant layer of complexity. The payroll system must manage diverse parties, from the Ministry to individual schools, including teachers, specialists and their support staff, and a complicated set of employment agreements. It’s not enough for the system to generate paychecks; it also needs to be able to centralise pay information and carry out retroactive computations to accommodate a diverse range of non-standard work arrangements.

This initiative inevitably conjures memories of the Novopay saga, a well-intended but ultimately tumultuous effort to modernise the education payroll system. In 2005, Australian company Talent2 was awarded a contract to replace the then-functional but outdated system provided by Datacom with a modern solution called Novapay. Hopes were high, but when the system finally went live in 2012, it was anything but smooth sailing. Implementation issues were rampant, leading to a considerable number of payroll errors. The result was a significant cost increase and a crisis of confidence in the Ministry of Education and the public sector.

Following a Ministerial inquiry in 2013, the government felt compelled to intervene. In 2014, it transferred control of Novopay away from Talent2 and gave it to a new government-owned firm called Education Payroll Limited. The move began a stabilisation phase with focused efforts to improve system performance and user experience.

The 2013 Ministerial inquiry noted several technical failures but also found significant financial and governance issues. The inquiry found that poor governance was worsened by optimistic reporting that obscured the actual state of the project, making effective oversight and decision-making all but impossible. This resulted in the Novopay project suffering a $23.9 million cost overrun, taking the total expenditure to $56.8 million.

In the following years, continuous changes have been made to address difficulties during its original installation, boosting Novopay’s functionality, accuracy, and user experience. The government and related partners have worked extensively to make Novopay a more reliable system for administering payroll in the school sector.

Today, Novopay is both a testament and a cautionary tale to the challenges and opportunities of modernising critical public sector IT systems. The story of its challenges and subsequent stabilisation provides a valuable case study for successfully implementing large-scale IT projects, particularly in sectors as critical as education.

Novapay has left an impression, reminding us to pay close attention when planning, involving all relevant parties, and assessing the final product. It is likely, this time, that the government and the public won’t be satisfied with merely technological fixes; instead, they will be looking for reassurances to help put to rest past mistakes and pave the way for a brighter future in which lessons learned from the past aren’t repeated.

The information collected through the current research will remain confidential and solely for internal assessment. It’s also crucial to note that this initiative does not yet constitute a formal tender or an indication of a direction. It’s a pivotal step, nonetheless, setting the stage for decisions that could significantly impact the education sector’s payroll operations for years to come.