I N BVRG H + HR Service Centre/Payrol I Services Integration. Item no Report no. Finance and Resources Committee.

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1 + ED I N BVRG H + THE CITY OF EDINBURGH COUNCIL Item no Report no c1 HR Service Centre/Payrol I Services Integration Finance and Resources Committee 24 August I Purpose of report The purpose of this report is to seek approval for the integration of the HR Service Centre (HRSC) and Payroll Services, currently located in Corporate Services and Finance respectively. This report provides an estimate of staff savings which will be achieved over a three year period and outlines the changes which will be required in order to achieve these savings. Background In December 2005, the e HR Business Case recommended the integration of HR administration and Payroll in order to maximise the benefits of implementing an integrated HWPayroll system. An HR Service Centre was established from November 2007 as the e HR system was rolled out, and Payroll Services adopted a centralised model in February However, the two services have remained separate and while both services have secured efficiency savings, further savings can be achieved through integration. The HRSC and Payroll Services are currently being considered for Alternative Business Models. In the meantime, departments are required to proceed with their own internal service improvement plans. It has therefore been decided that the only way to maximise efficiency savings is to integrate the HR Service Centre and Payroll Services. Consequently, an organisational review was initiated in November Combining HR and Payroll in one shared service centre is recognised best practice and has been recommended in the past by consultants such as BT, Orion and Capgemini. The benefits of this model are that it: 0 removes inefficiencies and information transfers between HR and Payroll; streamlines processes for the full life cycle of an employee; improves customer experience from having one point of contact ; and achieves cost reductions on an incremental basis. I

2 3 Capgemini Findings and Resultant Proposals 3.1 In December 2009, Capgemini Consulting were engaged to help develop a new structure for the integrated service, From the information they have gathered during this exercise, Capgemini s main conclusions are: 0 HR and Payroll have already made improvements ahead of other councils in Scotland; there are still significant manual processes, particularly in Payroll: 0 employee and manager self service should be maximised; and 0 improvements should be progressed in line with the Modernising Pay timetable. 3.2 The current HRSC and Payroll Services structures are shown in Appendix 1. A proposed new integrated structure is shown in Appendix 2. This new structure identifies the first two phases of the transformation journey. Phase 1 reflects the position on Service Integration, Phase 2 the revised proposed structure following implementation of rnodernising pay and payroll rationalisation. Neither Phase 1 or 2 reflect recent revised proposals relating to reducing management costs by reducing layers of management or extending spans of control. This is primarily because of the considerable changes required both technically and culturally to implement Modernising Pay, rationalise payroll frequencies, significantly increase self service and provide expertise to both the Alternative Business Model project and Internal Service Improvement plan. However, as noted in Para 4 below, Phases 1 and 2 do deliver a reduction of some 21 FTE posts. 3.3 Phase 3 will be developed in accordance with the new guidelines on reducing management costs. Details of the Phase 3 structure will be influenced by the progress of the Alternative Business Model and the internal improvement plan. A particular consideration will be the likely savings to be generated by bringing all Corporate Transactional activity together as one operating unit. Phase 3 of the transformation journey is planned for October 201 I. 4 Organisational Review 4.1 The HRSC currently provides Helpdesk, administrative and transactional services (contract changes, recruitment etc) for all Council departments. The HRSC also provides management information to meet statutory and business requirements, and maintains structures and reporting lines on the e HR system. 4.2 Payroll Services provides a service to all employees and elected members of the Council and external customers. This includes the provision of an e HR system with appropriate development and controls, administering payrolls of various frequencies, temporary data processing, staff cars and salary sacrifice schemes. 4.3 There are currently a total of FTE staff in HRSC and 52.3 in Payroll Services. The proposed organisational structure for Phase 1 will remove 6 management posts (3 Managers and 3 Team Leaders). 2

3 4.4 Considerable resources will be required to manage the transition to the new structure, and to support the implementation of both Modernising Pay in October 2010 and the move to monthly pay in April 201 I. However, once these changes have taken place, there is scope to achieve further staff savings from: reducing the complexity and frequency of queries relating to employee terms and conditions; reducing administration associated with the weekly, fortnightly and four weekly payrolls; and significantly reducing the effort involved with the input of temporary data. 4.5 The proposed structure for Phase 2 reflects the move to monthly pay for all employees foiiowing implementation of modernising pay. There will still be considerable transformation/development work required to consolidate the move to monthly pay and at this stage no changes to the structure are proposed for the service development part. However the considerable efficiencies achieved by moving to only a monthly payroll frequency enables a reduction of 12 Customer Assistants and 3 Payroll Administrators. 4.6 The final part of the transformation journey (Phase 3) is planned to be achieved in October 201 I when it is considered that all changes to processes/systems etc will have been completed and proposals are outlined at 3.3 above. 4.7 It must be recognised that the timescale for achieving these savings is dependent on the implementation date for Modernising Pay. Staff will be integrated from the existing HRSC and Payroll Services and will be co-located at either Waverley Court where the Payroll staff are currently based or Chesser House where the HRSC is located. 4.8 Consultation with staff and trade unions has taken place on the structure and revised job descriptions. The job descriptions have been assessed under the current job evaluation scheme, and also under the new scheme which will be implemented with Modernising Pay (Appendix 3). 4.9 A protocol for the assignment of existing employees to the new structure has been developed and agreed with the Trade Unions. In accordance with the terms of the protocol, staff will be offered ring-fenced interviews where appropriate, or be considered for direct matching to suitable posts in the new structure The Director of Finance and Director of Corporate Services will agree appropriate management arrangements during this transition period. The situation following the transition period will be influenced by the outcome of the ABM project, the consideration of the potential to centralise all corporate transactional activity in one area and the possible restructuring following the retirals of both Directors. 3

4 Timetable As indicated above in view of the support required from HRSC and Payroll Services in implementing Modernising Pay, a phased approach to implementing the new structure is required. A transition plan has been prepared which includes the change management activities necessary to deliver the integrated service, e.g. process review, communications, training and benefits realisation. The phasing arrangements are planned to commence in July Financial Implications Since 2008, both HRSC and Payroll have made significant reductions in staffing levels (approx 25%). This has been achieved by integrating their respective services and the introduction of e-hr. Annual savings in excess of f800k have been delivered and contributed to both departmental savings and the ehr business case. The proposed structure will initially remove 6 FTE management posts (Phase I) with a further reduction of 15 FTE following the delivery of Modernising Pay, the transition to monthly pays and rationalisation of a merged service (Phase 2). Removing one existing tier of 6 management posts (Phase 1) represents a reduction in cost of approx f260k per annum. It is anticipated that these posts can be removed by December 2010 generating savings of f80k in 2010/11. Full year savings of f260k will then become effective thereafter. Going forward, it is anticipated that 9 posts could be saved by April 201 I, with a further 6 by September 2011 (Total 15). This would generate savings of f220k in 201 1/12, with full year savings of f300k being applied thereafter. To deliver the above requires significant service transformation and once this has been completed Phase 3 will be progressed based on best practice at that time. This phase will address management delayering and spans of control. There may, however be significant costs arising from early retirement/ termination. lt is not possible to estimate these with precision at this stage. A further report on one-off costs will be provided following the integration of HR and Payroll. However one-off costs are likely to result in savings being offset in the first year and part of the second year if any retirementdterminations are required. To deliver the benefits identified in this report it will be necessary to develop staff in the new structures to carry out their roles effectively. There may also be accommodation and ICT costs associated with the merger of both services. These costs will be contained within existing departmental budget provision. In total, the new business model will deliver annual savings from Phases I and 2 of approximately f560k effective fully from 2012/13 onwards. This represents 4

5 a reduction approaching 20% based on current single service HRSC and Payroll staffing budgets. 6.9 This model will require significant reductions in the amount of manual effort in recording temporary data input. This will be achieved through maximising the use of employee and manager self service and the use of spreadsheets for electronic data loading. 7 Environmental Impact 7.f There are no adverse environmental implications arising from this report. Colocating the two sections will reduce the Council s carbon footprint through reduced costs of heating, lighting etc. 8 Conclusions 8.1 A new integrated HR and Payroll Shared Service centre will provide a more customer focused and cost effective end-to-end transactional service to the Council and its customers. The integrated service, which is based on best practice, will be in a better position to compete favourably with external providers. It also provides a strong basis for providing services to other organisations. 8.2 This model will facilitate service improvements on a sensible staged basis and is essential to delivering the required savings. These savings will contribute to the e HR shorffall and departmental budget savings. 9 Recommendations 9.1 It is recommended that the Committee: i. ii. approves the new structure for an integrated HR and Payroll Shared Service Centre on a staged basis as outlined in Appendix 2. notes the estimated cost savings to be made over the three years from 2010/11, as outlined in the report. Savings exclude any termination costs that may be incurred. \ / Director of Corporate Services 3.p 5. +-% Donald McGougan Director of Finance 5

6 Appendices 1 Current organisational structures 2 HR and Payroll Service Centre - Future Organisational Structure 3 Grades for new posts in structure ContacVtelErn Sally Griffiths, Council HR Service Centre Manager, , ail sally.griffiths@edinburgh.gov.uk; Ian Cunningham, Payroll and Systems Manager, , ian.cunningham@edinburgh.gov.uk. Wards affected None Single Outcome Agree ment Background Papers 6

7 tures Pavroll Services Appendix 1 I Systems & Control Payroll Operations Strategic 8r Business Development 1 Principal Manager XI I Off i cerlad mi n is t rato r XI 4.3 I,. I" Off icer/ad mi n istrator :;, x

8 HR Service Centre Human Resources. Centre Manager Manager Customer Services Manager Team Leader x2 4 AdvisordAssistants Assistants Team Leader x6 x35.2

9 WR & Payroll Service Centre: Future OrganisationaI Structure Appendix 2 Phase 1 - Service Integration HR & Payroll Setvice Centre Customer Services & Business Support Development Analysts Analysts Service Systems Analysts Projects 1 Total FTE

10 HR & Payroll Service Centre: Potential Organisational Structure Phase 2 (after Mod Pay & Monthly pays) HR & Payroll Sewice Centre Senior I Assistants Customer ServiceslBusiness support I L Analysts Service Development Total FTE 83.5

11 Appendix 3 i 1 Job Title Grades for new posts in structure I HR & Payroll Service Centre Manager 2 Customer Services Manager so415 3 Payroll &Systems Manager SO415 4 Service Development Manager SO415 5 Systems Specialist so2 6 Service Development Specialist SOl/2 7 Pay Control Specialist so1 8 Customer Services Team Leader"- 9 Recruitment Team Leader 10 Payroll Team Leader I I I Proposed grade under existing Job Evaluation Scheme so911 0 Grade 11 Modernising Pay grade Grade 9 Grade 9 Grade 9 Grade 8 Grade 8 Grade 7 AP5/SOl Grade 7 A P5/SO 1 Grade 7 A P5/SO I Grade 7 f Staff Benefits Team Leader 1 APS/SOI Grade 7 MI Specialist AP 5/SO I Grade 7 Systems Analyst AP314 Grade 6 Service Development Analyst AP314 Grade 6 Business Support Administrator AP3 Grade 5 Pay Control Administrator AP213 Grade 5 MI Analyst AP2/3 Grade 5 Staff Benefits Administrator AP2 Grade 5 Senior Customer Services AP2/3 Grade 5 Assistant Customer Services Assistant GS 3/AP 1 Grade 4 Payroll Assistant GS3/APl Grade 4