This report outlines the business case for the purchase of an integrated HR & Payroll system.

Transcription

1 Agenda Item No. 10 HR & Payroll system HR&OD Manager This report outlines the business case for the purchase of an integrated HR & Payroll system. Cabinet member(s): Garry Wheatley Ward(s) affected: All Contact Officer, telephone Jackie Foglietta number, and jfoglietta@s-norfolk.gov.uk 1. Introduction 1.1 The Council currently operates separate Human Resources and Payroll IT systems, the separation and functionality of which inhibit efficient and effective working. This report presents the business case for the procurement and implementation of a new integrated HR & Payroll system. 2. Background 2.1 The Council delivers an in-house Human Resources and Payroll service. These two functions have historically been separately delivered in the Council. However, recognising the close nature of the work the two functions were brought together into one team a few years ago. Since then, the combined tea has continued to work on two separate IT systems; delivering HR activity through a standalone system implemented around ten years ago and Payroll activity through a standalone system implemented back in the 1980s; this is the oldest (and subsequently carries the greatest risk of support being withdrawn) IT system in the Council. Indeed, the Council continues to run an old mainframe essentially to support the Payroll system. 2.2 An efficiency review of the HT & Payroll function (a "Lean Lite" review) was undertaken in Spring 2012 with an overarching objective to simplify and streamline HR processes, leading to the realisation of both cashable and non-cashable savings.

2 2.3 The review identified that current systems were considerably hampering the operational effectiveness of the HR service and that improvements (and savings) could only come from efficiencies in the way staff data is collected and processed across the organisation, by minimising touch points and introducing single points of data entry. 2.4 In essence, the recommendations from the review identified the need to explore alternative options for the future delivery of transactional HR and Payroll activities. 2.5 Options assessed were: Use of elink and Middleware technology to develop workarounds to existing system issues. Outsourcing of transactional HR and payroll processes. Procurement of a new integrated HR & Payroll system. 2.6 The outcome of this assessment suggested that workarounds would not address the risks and issues with existing systems, would be costly in terms of internal development time and would result in a solution so complex that the existing systems would be developed into a bespoke IT solution that would contravene SNC's IT Strategy. 2.7 Market testing on the option of outsourcing transactional processes as a solution was found to be very costly and would likely lead to flexibility and internal control being compromised, with the level of service required unlikely to be achievable at an affordable cost through an external provider. 2.8 As a result, Management Tam agreed to progress detailed consideration for the procurement of a new integrated system. 2.9 It was agreed that a new system needed to: Interface with existing SNC systems, i.e. Integra, IDOX and Corvu. Eliminate the need for duplication and manual calculation. Deliver real-time accurate workforce data. Move transactional processes from paper to electronic. Enable staff to "self-serve", allowing them to access and make amendments directly to their personal data as well as to access payslips, P60s, etc. electronically and to submit and have authorised requests for leave, expense claims, etc. Enable managers to more effectively carry out their people management responsibilities by providing them with direct access to staff data. In essence, deliver reduced overhead costs to the organisation of HR & Payroll services, whilst at the same time delivering

3 better staffing information to enable managers to manage more effectively. 3. Current Position 3.1 The existing payroll system was introduced in the 1980s and is outdated and inefficient. It is a paper based system (with the security risk that brings), requires manual calculations and is no longer technically supported. The current HR system dates back to 2003 and has fundamental capability issues that prevent access to real-time staffing information and necessitate manual manipulation of data. The two systems are not integrated and so result in the need for significant duplication of data entry. Neither system interfaces with other SNC IT systems, e.g. Integra. 3.2 The case for change has been accelerated due to our current systems' inability to comply with HMRC's requirement for submission of Real Time Information (RTI). In February 2013 we were advised by our current systems supplier that it was unable to provide the necessary software upgrade to the Payroll system to enable compliance with RTI by the implementation date of April The supplier had secured HMRC s agreement to an extension until July 2013 for its customers using this system and we have been notified recently that it is now seeking a further extension until November In addition to the RTI issue, we have low confidence that our existing systems will be able to meet the requirements of Pensions Autoenrolment (for SNC these need to be implemented in November), or the forthcoming changes to the Local Government Pension Scheme (LGPS), with the move from a final salary to career average scheme. 4. Options Appraisal 4.1 A detailed Specification has been developed to identify the business, HR and IT requirements of an integrated system and this has been used to appraise potential solutions through soft market testing. This has included indicative costings and in-house demonstrations from two of the leading UK suppliers as well as feedback received from reference sites. 4.2 In appraising options, we have looked at product, cost and service. In addition to meeting the objectives outlined in 2.8 above, our preferred solution will need to enable realisation of cashable and non-cashable savings over the lifetime of the business case, will need to meet the specific requirements of Local Authorities, will need to have a trackrecord of implementing timely solutions to comply with changing legislation, and will need to be a product that can grow at an affordable

4 cost in the event that we wish to expand the HR & Payroll offering outside of SNC. 4.3 As a part of this options appraisal we have considered, in the context of purchasing an integrated system, whether this should be internally or externally hosted, as well as whether an internal system with an externally managed payroll service would provide us with the optimum solution. 4.4 Internal hosting has been discounted as this would not align with SNC's IT Strategy and external hosting has many advantages over internal; higher levels of security and resilience, more resource to support, ease of implementation and scalability. 4.5 An externally managed payroll service is not felt to be the best solution at present as we believe an incremental approach is needed, retaining internal specialist knowledge throughout the introduction of a new system and embedding self-service, engaging staff with this new concept. 4.6 For these reasons the preferred solution is an integrated system, managed internally and hosted externally. 5. Procurement 5.1 As there is a pressing need to comply with HMRC's requirements in respect of RTI, it is not proposed a full OJEU procurement process is followed; Contract Standing Orders allow procurements to follow alternative approaches should the business need dictate. We have estimated that the value of this procurement could be above the OJEU threshold. However, we need to be careful that the costs of a prolonged procurement do not exceed the projected benefits to be gained. 5.2 With the HMRC requirement for RTI, to undertake a full procurement risks penalties for non-compliance. We have already obtained extensions to the timeframe for implementation and a solution that will enable us to begin RTI reporting from November 2013 will enable SNC to meet the requirements of HMRC. 5.3 The majority of integrated HR & Payroll system providers already exist on pre-tendered frameworks and we have identified a number of frameworks for HR & Payroll systems that are available for use by public sector organisations without any further procurement being necessary. These are single supplier frameworks, with the result that as there is no competition between suppliers within the same framework the standard terms and conditions cannot be changed in any material way. It will be important therefore that we conduct robust due diligence in respect of our choice of framework to ensure the terms

5 and conditions meet our requirements and we are taking NPLaw's advice on this. 5.4 A further constraint of this type of framework is that the contract term cannot be for more than four years and consequently we will need to consider our options at the end of the contract period. It is however common for suppliers to be on a range of current frameworks and so we may choose to use the same supplier from a successor framework, which will in itself have been subject to an EU compliant procurement. For this reason the business case has been drawn over five years, anticipating that a successor framework will be available Appendix A attached outlines the business case, based on indicative costings obtained through our options appraisal. It is anticipated these costs may be reduced through pre-contract commercial negotiations. 6.2 The estimated implementation (capital) cost of the new system is c. 145k, which will be funded from the IT capital budget in this financial year. It is anticipated that the funding of this will be drawn from the Invest in the Future Reserve. 6.3 Following implementation, the estimated annual revenue cost is c. 16k, compared to current annual revenue costs of c. 28k. 6.4 The business case anticipates annual revenue savings from year three of c. 45k, with cumulative savings over five years estimated at c. 113k. 7. Timescales 7.1 A detailed project plan is currently under development; outline timescales are as follows: Pre-implementation: July - August 2013 Selection of framework and supplier, pre-contract negotiations, placement of order. Phase 1: September - December 2013 Implementation of Core HR and Payroll modules to enable parallel payroll running in November and December (which will enable us to use the new system data for RTI and auto-enrolment purposes), with full implementation of these core modules in January 2014.

6 Phase 2: January - April 2014 Implementation of Recruitment, Performance Management and Training modules, to enable data input/reporting from 2014 Performance Reviews. Phase 3: May March 2015 Implementation of Health & Safety and Occupational Health modules, as well as self-service. The latter will require sufficient time to train and introduce new working practices to staff and managers. 8. Relevant Corporate Priorities 8.1 Driving services through being businesslike, efficient and customer aware. 9. Implications/Risks 9.1 Financial 9.2 Legal Financial implications are outlined in Section 6 of this report. Current systems do not comply with HMRC's requirement for submission of Real Time Information in respect of SNC's workforce and there is low confidence that existing systems will be able to meet the requirements of Pensions Auto-enrolment or the forthcoming changes to the Local Government Pension Scheme. 10. Conclusions 10.1 The outcomes of the Lean Lite review provided a compelling case to introduce a new solution for the delivery of transactional HR and Payroll activity; this case has been strengthened by the knowledge that our current systems are unable to comply with emerging legislation Even without taking into account anticipated savings in staff costs over time, a modern integrated system will cost c. 12k p.a. less in revenue than our current systems, which are no longer fit for purpose Implementing a new system will bring a host of benefits in terms of moving us onto the latest technology with full automation, internal selfservice and real-time management information, will provide a solution that integrates into SNC's existing IT structure and supporting systems,

7 as well as a scalable product that we could potentially use to provide services to others. 11. Recommendations 11.1 It is recommended that Cabinet: (a) Approves the business case for the procurement and implementation of an integrated HR & Payroll system; (b) Approves the release of funding from the IT capital budget FY 2013/14 to fund the capital costs; (c) Delegates authority for the Chief Executive, in conjunction with the Cabinet Member for Resources, to approve the selected framework and supplier for the provision of a new integrated HR & Payroll system.

8 Implementation (Capital) Annual (Revenue) HR Staff Backfill Legacy System Savings HR Staff Savings Annual Revenue Cumulative Revenue Business Case Costings August 13 July , , , , , , August 14 July 15 16, , , , , , August 15 July 16 16, , , , , August 16 July 17 16, , , , , August 17 July 18 16, , , , , APPENDIX A