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Talent2 boss – we’re losing money on Novopay

Chief executive breaks media silence; namechecks local partners. UPDATED: "We knew this job was dangerous when we took it," Talent2 boss says as he addresses delays, glitches.

Chris Keall
Wed, 21 Nov 2012

Talent2 has been paid “nothing like $30 million” for teacher pay system Novopay and is losing money on the contract, CEO John Rawlinson told NBR ONLINE today.

The Aussie executive also says some members of his team would not want to take another contract with the NZ government.

Breaking its media silence – which Mr Rawlinson says was mandated by Talent2’s Ministry of Education contract until special clearance was provided on Tuesday - the Australian company this morning issued a media statement.

The statement (see RAW DATA, below), namechecking two of five New Zealand companies involved with the glitch-plagued new teacher pay system.

At face value, the purpose of the statement is to praise the partners’ work.

NBR put it to Mr Rawlinson that the two companies named in his statement today (Fronde and Asparona) would not particularly appreciate being publicly tied to Novopay. Perchance Talent2 is angling to spread the blame around?

(The other three local partners on the project are Assurity; a software testing company, Gen-i, handling voice and data systems; and Revera, for data centre hosting. PwC is also consulting, Mr Rawlinson says. Fronde later told NBR its role in the project centres on IT infrastructure. Mr Rawlinson says Asparona came onboard to help with software developement "at a crucial stage". John Araboglos, Gen-i technology lead for the Ministry of Education, told NBR "Gen-i has not been involved at all in this project. We do supply voice and mobile services to the Ministry offices. Data services go through One.Govt.")

Not at all, Mr Rawlinson says.

He was trying to say the project has funnelled a lot of money to New Zealand contractors. , “Another journalist who’s been stalking me around town says we’ve been paid $30 million. It’s a significantly lower amount and much more has gone out.

“We’re not this big bad Australian company. We’re an Australasian company. Significantly more has been paid out to people in New Zealand, firms in New Zealand, and leasing premises in New Zealand.”

He adds, “We’re not making money on this.”

He won’t say how much the 10-year contract is worth overall. Talent2, which was taken private, is profitable, he says.

 Would Talent2 bid for another NZ government contract?

“We have to get this one right first,” Mr Rawlinson says. “I’d be disappointed if we didn’t get to participate more in NZ government because we’ve learnt so much. But there are other people in my team who don’t feel like that.”

Why the delays?
“The Novopay project from start to finish took the best part of four years,” the Talent2 boss says.

Why was there a two-year delay after the target mid-2010 deployment date?

“A couple of things, but mostly the time for the customisation of the software. I don’t want to make this an excuse but you’d be struggling to find a more complex payroll.

“The ministry had things they needed built in so the delay was about specifying, developing testing, re-specifying.”

So it was complex – but hasn’t that been known since Talent2 bagged the tender in 2005?

Or, as Mr Rawlinson put it to NBR this afternoon: "We knew the job was dangerous when we took it."

Did Talent2 fail to appreciate the complexity of the project, or did the Ministry keep moving the goalposts?

“A little bit of both,” says Mr Rawlinson says.

Why the problems?
The Talent2 boss says there are no technical problems with Novopay.

He emphasises it is based around Alesco a “large scale, complex payroll and HR product” that Talent2 has had for 15 years. Alesco, in turn, is developed using Oracle database software.

“Interestingly enough there’s not really a problem with the technology,” Mr Rawlinson says.

“The vast majority of issues are about interfacing with our help centre.”

The parade of angry teachers and principals on the evening newscasts confirms a lack of training, but whose fault is that?

"Sector readiness," was the Ministry of Education's responsibility, Mr Rawlinson says.

Technical glitch snowballed into process delays
Talent2 says it has now cleared a backlog, which Mr Rawlinson concedes was caused by a glitch (payslips being 24 hours late for the first pay run) has now been cleared.

The payslip problem caused a lack of confidence in the new system. Talent2's call centre was overloaded wiith complaints. Problems snowballed from there, Mr Rawlinson says.

Talent2 has just moved nine payroll experts to New Zealand Mr Rawlinson says.

The company now has 130 staff dedicated to Novopay (the 150 number quoted below includes 20 who also work on a recruitment solution in NZ).

Holiday challenge
Although it has cleared its backlog, and salary errors have reduced, Talent2 now faces one of Novoppay's biggest challenges: correctly allocating holiday pay.

Mr Rawlinson says schools having the most problems with Novopay have been identified, and are being called by team that includes poeple from Talent2 and the Ministry of Education.

An acceptable level of failure
Given it's paying up to 110,000 people under its Ministry of Education contract, will Talent2 every have a perfect pay cycle?

If not, what is an acceptable error rate?

"Certainly what we've got now is far too high," Mr Rawlinson says.

But the Talent2 boss could not immediately say what would constitute a realistic ongoing error rate.

Mr Rawlinson confirmed Talent2 would face penalties if it faced to meet key performance indicators - last week Prime Minister John Key said financial penalities were possible - but would not comment in detail, citing a confidentiality clause in his company's contract.

"We’ve been working weekends, we’ve been working nights," Mr Rawlinson told NBR.

Maybe so. But many will still be wondering how there could be such confusion, anger, and so many errors, after a four-year build up.


Talent2 Media Statement | 21 November 2012

In response to questions about the implementation of the Novopay payroll solution, Talent2 would like to provide the following update from its Group CEO, John Rawlinson.

As of Friday 16 November, 8,000 transactions have been cleared, and we are confident the next payment period (pay period 18 which is paid in full to staff on 28 November) will be delivered on time and within the standard expectations. We acknowledge that there will still be outstanding issues, but we are committed to and seeing continuous improvement.

Talent2 apologises for the inconvenience that payment disruptions and inaccuracies have had on New Zealand teachers, principals, support staff, and their respective schools as they have transitioned from the incumbent legacy system to the new Novopay solution. Talent2, together with the Ministry, have been working around the clock to resolve the issues surrounding this complex transition, and we are both dedicated to providing extra support as required. We are genuinely sorry for the stress that this has caused the education sector and we are confident we can resolve the issues.

Talent2 is the number one provider of payroll solutions in Asia Pacific and delivers complex payroll solutions for clients in over 30 countries, with a specialism in the government sector. Talent2 is drawing on its vast experience with complex implementations, including 17 years operating in New Zealand, to ensure Novopay is a success. We are undertaking a number of actions to ensure Novopay is stable and effective. The best way to make this a success is by working closely with the Ministry and the Education sector.

From Monday 19 November, all schools are being contacted as the Ministry takes further steps to resolve issues. A specialist team from the Ministry and Talent2 is calling every school to ensure they are supported for the year end and to get a full understanding of any other issues.

Novopay is the largest single payroll in New Zealand and one of the largest in Australasia. Since Go-Live in August, Talent2 and the Ministry have successfully managed over a billion dollars in salary payments, made over 550,000 separate pay transactions and managed 50,000 calls. The solution that pays approximately 100,000 education staff is managed by over 150 dedicated Talent2 staff, supported by five local New Zealand organisations, out of two delivery centres in Christchurch and Wellington.

Given the size and complexity of this implementation, there were inevitable teething issues during the transition period. For a payroll of this complexity it is not unusual for a very small percentage of those being paid to have issues with their pay. Nevertheless, Talent2 are confident the project is on track to efficiently and securely process future transactions and ensure staff are paid correctly, on time and with their personal details protected.

The Ministry of Education went to market with a request for development and operation of an online schools' payroll service. Talent2 won the contract following an open and competitive tender process, as confirmed by the Ministry.

Ian Clarke, CEO of leading New Zealand IT services company Fronde that provides subcontracted services related to the IT infrastructure that Talent2 uses to deliver to the Ministry, says, “Fronde has worked alongside Talent2 for many years, providing resources to support Talent2’s IT infrastructure. In our experience Talent2 is a professional and capable organisation that sticks to its commitments.” Don Sykes, CEO of New Zealand based software Development Company Asparona, added, “We have worked with Talent2 on developing the Novopay solution, and we have full confidence in their software and its applicability to meet the requirements of both the Ministry and the sector”.

The Talent2 Board, as well as local and international teams are committed to making this project successful for schools, staff, the Ministry and the New Zealand tax payer. Together with the Ministry, Talent2 is focused on improving the process to ensure the implementation is a success and provides a future proof system which moves from the legacy platform to a state-of-the-art solution which will deliver significant benefits and cost savings to both schools, and the Ministry. Ultimately, Novopay will result in significant savings for New Zealand taxpayers.

We would like to reassure the people of New Zealand that Talent2 has extensive experience and proven capability in delivering large scale payroll projects, with the business successfully paying almost one million people in the region, as well as effectively managing payroll for many New Zealand clients. Talent2 is absolutely committed to delivering a high quality service to the New Zealand government and its people, and we will do everything possible within our means to work with the Ministry of Education to ensure Novopay is a success.

Talent2 will provide further updates through the release of statements when appropriate.

Novopay Questions & Answers

»      Q: How many staff/teachers are covered by the Novopay payroll system?
A: The number varies between 90,000 and 110,000 per fortnight.

»      Q:  What is the volume of pay instructions received within a fortnightly pay period?
A:  We process approximately 2,500 new joiners, approximately 5,000 employment details changes and 50,000-60,000 timesheet entries per pay period.  There are over 50 different types of pay instructions.

»      Q: Are all outstanding payments now up to date?
A: For the most recent pay period, pay period 17 which was paid last week on 15 November, the Ministry of Education figures show that 92,465 school staff were successfully paid with 15 non payments identified at this point.  Just 494 transactions were not processed before the pay run, however not every transaction impacts pay.

As of 16 November, we have processed what is known as the “backlog” of pay instructions that were received between 22 August and the end of September.  For the current pay period all pay instructions received within the valid cut off periods will be processed.

»      Q: Are any personal address and financial details of payees being released?
A: No details are being released. In a relatively small number of cases, some data of payees was able to be seen by users at other schools who were signatories or authorised users in their own schools.  However details of their pay were never visible. This is not an issue with the system, but the access levels of some users. This is known to both Talent2 and the Ministry, and changes are being made to avoid this happening in the future.

»      Q: What exactly are the errors and what caused them?
A: This is a complex implementation, certainly the largest payroll project in New Zealand, so it is natural for there to be some transition issues. The problems have come from some human errors in the pay centres, some technical problems and what would be considered normal change related difficulties for users.  There was significant training and support for the transition and we are re-examining some of the content with the Ministry to improve the effectiveness.

For a payroll of this complexity it is not unusual for a very small percentage of those being paid to have issues with their pay as per standard industry benchmarks.

»      Q: Was sufficient support and training provided to school administration staff?
A: Online training, webinars, online help, FAQs, among other methods have all been available and again we are working collaboratively with the Ministry to ensure we help schools further.

»      Q: Why has Talent2 been silent about the system’s errors and complaints from schools?
A: Talent2 was legally constrained by a contractual clause (24.3) which did not permit us to make any public comment on the project’s status. This clause has now been revoked thus we are communicating with the media today and will be on a regular basis moving forward.

»      Q: Will Talent2 provide support over the Christmas period?
A: Yes, from Monday 19 November, all schools are in the process of being contacted as the Ministry takes further steps to resolve issues. A specialist team from the Ministry and Talent2 is calling every school to ensure they are supported for the year end and to get a full understanding of any other issues.

Talent2 Core Business Questions & Answers

»      Q: Who is Talent2?
A: Talent2 is the leading Human Resources Business Process Outsourcing (HR BPO) and Managed Services organisation in the Asia Pacific region, working with clients across diverse business types and industries to deliver end-to-end talent management solutions. These include HR Advisory, Payroll, Recruitment, RPO and Learning solutions to enable organisations to improve the power and productivity of their people.

Founded in 2003, Talent2 operates from over 40 offices providing services in 30 countries across Asia Pacific, Middle East, UK and USA.

It is the recognised market leader in HR and recruitment in Australasia and Asia. Talent2 is the number one Payroll Outsourcing provider in Asia Pacific with 14% market share (NelsonHall) and is the third largest provider of learning in Australia. It is the number one in recruitment process outsourcing (RPO) in Asia Pacific (NelsonHall) and the pioneer of RPO in Asia.

»      Q: Who owns the company?
A: In 2012, Talent2 was privatised by its founders, Geoff Morgan and Andrew Banks, through Morgan & Banks Investments (MBI) in partnership with Allegis Group, Inc. Allegis Group, Inc., a private company founded in 1983, is a staffing and workforce management company based in Maryland, USA.

»      Q: When did you start operating in New Zealand?
A: Talent2 launched its New Zealand operations in 2005, through the acquisition of a local recruitment firm. This also marked the start of local payroll operations, following the acquisition of HRIS and payroll software company, Concept Systems International in 2003. Through Concept, Talent2 has over 17 years HRIS and payroll expertise in the New Zealand market.

»      Q: How many people do you employ in New Zealand?
A:We don’t break down staff numbers by geography but we can say we employ more than 1,700 people in 40 offices across 19 countries and that we have been operating in New Zealand since 2005.

»      Q: What experience do you have designing and managing similar payroll solutions?
A: We process more than 970,000 payslips processed per month, supporting 31 countries. We manage payroll for more than 2,400 clients and 740,000 employees in Asia Pacific.

»      Q: What experience do you have in the Government and Education sectors?
A: Talent2 has extensive understanding and experience in delivering payroll services in the public sector, we partner with over 50 government agencies and over 30 education institutes in the Asia Pacific region, including 6 public sector clients in New Zealand.

»      Q: What services do you offer as part of your payroll solution?
A: Our payroll services can be delivered as a standalone service, or can form part of a Multi-Process Human Resources Outsourcing (MPHRO) solution. Our full MPHRO services include:
Employee and Manager Self Service

»           Data entry services

»           Time and attendance

»           Leave management

»           Payroll processing

»           Contact Centre

»           Bank disbursement

»           Tax filing

»           Treasury management

»           Social insurance processing and filing

»           End of Year processing

»           Expatriate Payroll

Chris Keall
Wed, 21 Nov 2012
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Talent2 boss – we’re losing money on Novopay