Taxpayers dig deep to take over Novopay

Last updated 05:00 31/07/2014

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After throwing $45 million at trying to fix the Novopay teacher payroll system in the past two years, the Government has been forced to seize control.

Taxpayers will spend a further $9.6m over six years to use the software provided by Talent2, the Australian company that designed and has administered the system and which, after weeks of negotiations, has refused to spend any more to fix the problems.

Yesterday Steven Joyce, the minister responsible for Novopay, revealed a deal had been struck that will see the Government take over responsibility for administering the system, which has cost $110m in the past two years - $45m more than expected.

Joyce said considerable effort had gone into improving the system, with some success, but after recent negotiations, Talent2 had decided it was "not prepared to provide the extra resources that are necessary for further developing of the system within the current contractual arrangements".

Talent2 will pay $22m compensation in cash and discounted services, leaving taxpayers $23m out of pocket.

In October, a new government-owned company will take over responsibility for payroll processing for 60,000 staff.

"This decision has been made in the best interests of all parties - staff, administrators, schools, and the Government," Joyce said. "It became the logical next step towards giving schools a more stable, sustainable and simple payroll service."

The changes would improve the service, with the sector helping guide those improvements, though the system could be privatised again in the future.

A Talent2 statement said the decision had been reached by mutual agreement "and settles a flawed contractual arrangement between the parties, which was found in the June 2013 ministerial inquiry as not fit for purpose".

Prime Minister John Key said teachers would take confidence from the Government taking over. "They know it will be properly resourced and properly looked after."

Principals' Federation president Phil Harding described the news as "mildly positive", saying it put the onus squarely on the Government, which had lost its "whipping boy". Principals were pleased to see Talent2 forced to stump up with some cash.

Labour's education spokesman, Chris Hipkins, said the Government had little choice but to step in. However, taxpayers had inherited a "dog" and there was no guarantee it could be fixed.


Since its inception in 2012, the $110 million Novopay scheme has been beset by problems. It was installed despite tests showing it was not ready, and schools immediately struck payroll problems.

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As a result, the Government was forced to provide a $6m support package in March last year to compensate for the additional work.

That same month the Government also forked out an extra $5m to help fix 542 software bugs and to address a backlog of more than 19,000 unresolved issues.

The following year Talent2 emailed personal and payment details to the wrong schools. In June 2013 a ministerial inquiry was highly critical of the rollout, while schools have repeatedly complained about issues with staff pay.


$45.41m - the cost to taxpayers of the Novopay fiasco

$9.6m - what Novopay will continue to receive from taxpayers over the next six years

2457 - schools in the payroll system

90,000 - teachers and support staff

$170m - what they receive in salary and wages every fortnight

660 - school staff incorrectly paid in one pay cycle earlier this year

- The Dominion Post


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