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1 NOT PROTECTIVELY MARKED Report to: SCOTTISH FIRE AND RESCUE BOARD Report Number: B/FCS/9-13 Date: 26 SEPTEMBER 2013 Report By: CHIEF OFFICER Subject: HR/PAYROLL PROJECT BUSINESS CASE 1 PURPOSE 1.1 The purpose of this report is to seek approval from the Board of the business case for implementing a single HR and Payroll solution for the Scottish Fire and Rescue Service (SFRS). 2 RECOMMENDATIONS 2.1 The Board is asked to approve the following recommendations: a) that the draft HR/Payroll business case, which is attached at Appendix 1, be approved and the project commenced, in consultation with Scottish Government and employee representative bodies, b) that a formal approach be made to Scottish Government, in line with their policy on consultants, to seek approval for the contractor element of project costs. 3 BACKGROUND 3.1 The introduction of the new Scottish Fire and Rescue Service has resulted in multiple Council service providers, processes and systems to deliver HR information and payroll processing. In order to simplify the processes and achieve financial savings a project is proposed to implement a new single HR and Payroll solution for SFRS. SFRSBoard 26/09/2013/Reports Page 1 of 4 Version: /2013 HR/Payroll Project Business Case

2 NOT PROTECTIVELY MARKED 3.2 The Board at its meeting in June approved a range of projects for transitional funding in 2013/14 of which HR/Payroll was one, on the understanding that the detailed business case would be presented to the Board. Scottish Government will only release funding for this project once satisfied with the business case. 4 ANALYSIS 4.1 SFRS currently has twenty payrolls processing employee pay, eighteen of which are delivered via service level agreements with Councils, and the remaining two are delivered in-house, covering the former Strathclyde area and Board members/slt. 4.2 The cost of payroll service provision is over 1 million per year and significant savings are expected by reducing Council service provision costs and also reducing payroll resourcing. 4.3 HMRC would generally expect a single PAYE reference for a single employer. At present there are multiple references reflecting the multiple providers. HMRC has accepted the continuation of this arrangement at present, in recognition of the legacy position, on the basis that SFRS is actively working towards a single PAYE reference. 4.4 The current HR systems are disparate and this project will result in a single integrated HR and payroll solution which will enable better information to support workforce planning and also to provide more timely and accurate information on our people. In addition, significant investment has already been made in a solution which enables programming and managing the delivery of training and skills development at the training centre in Clydesmill, and it is intended to roll this across the other training campuses. 4.5 The People & Organisational Development Directorate will in tandem be progressing a new Pay & Reward Strategy on which this project is dependant. 4.6 The business case outlines a number of options which have been considered to deliver the requirements. The preferred option is to utilise the system currently in operation within SFRS to build the new pay model, on a monthly pay basis, which can be accommodated within the existing contractual arrangements. This option accelerates the delivery of the project and also leverages previous investment. SFRSBoard 26/09/2013/Reports Page 2 of 4 Version: /2013 HR/Payroll Project Business Case

3 NOT PROTECTIVELY MARKED 4.7 The project will be governed using PRINCE2 methodology and progress will be reported through the Service Transformation Programme Board and Committee. 5 FINANCIAL IMPLICATIONS 5.1 This is a complex two year project requiring both internal and external resources to deliver the solution. The overall project cost is estimated at million, and expected savings are 423,000 per annum. The project pays back after 8 years. 5.2 Provision has been made within the 2013/14 transitional funding programme for Year 1 costs, however as the project cannot now commence until 1 st October, it is estimated that costs of 548,000 will effectively slip into 2015/16, along with anticipated voluntary severance for remaining supernumerary staff ( 250,000), for which there is currently no transitional funding provision. Discussions are on-going with Scottish Government to identify the best way to address this timing issue. 5.4 Detailed financial implications of the project are outlined further within the report and appendices. 5.5 It will be necessary to seek formal approval from Scottish Government regarding the use of external contractors under their policy on consultants, as this element of the project budget is in excess of the 100,000 threshold. 6 EMPLOYEE IMPLICATIONS 6.1 There will be a change to payroll processing arrangements for all employees with some groups being impacted more than others. Transitional arrangements will require to be agreed for those employees transferring to a monthly pay cycle. 6.2 There will be a reduction in the number of staff required to administer payroll arrangements once the project has been fully implemented. Steps will be taken to minimise the impact on individuals and to ensure appropriate alternatives are made available. 7 EQUALITY IMPACT ASSESSMENT AND CONSULTATION ARRANGEMENTS 7.1 A full equality impact assessment will be undertaken as part of the project. SFRSBoard 26/09/2013/Reports Page 3 of 4 Version: /2013 HR/Payroll Project Business Case

4 NOT PROTECTIVELY MARKED 7.2 The project will be progressed in consultation with employee representative bodies, utilising the arrangements of the Employee Partnership Forum. ALASDAIR HAY CHIEF OFFICER 26 th September 2013 SFRSBoard 26/09/2013/Reports Page 4 of 4 Version: /2013 HR/Payroll Project Business Case

5 FINANCE AND CONTRACTUAL SERVICES DIRECTORATE BUSINESS CASE HR/PAYROLL PROJECT Author/Role Date of Equality Impact Assessment Quality Control (name) Authorised (name and date) Date for Review John Thomson Sarah O Donnell Sarah O Donnell

6 1. INTRODUCTION BUSINESS NEED SPECIFIC PROJECT OBJECTIVES CONTRIBUTION TO SFRS KEY OBJECTIVES 3 2. STRATEGIC FIT FUNCTIONAL OVERVIEW EXISTING ARRANGEMENTS STAKEHOLDERS CONSTRAINTS DEPENDENCIES STRATEGIC BENEFITS STRATEGIC RISKS CRITICAL SUCCESS FACTORS SCOPE: MINIMUM, DESIRABLE, AND OPTIONAL OPTIONS APPRAISAL LONG AND SHORT LIST OF OPTIONS OPPORTUNITIES FOR INNOVATION / COLLABORATION WITH OTHERS RISK QUANTIFICATION AND SENSITIVITY ANALYSIS DETAILED OPTIONS APPRAISAL PREFERRED OPTION IMPLEMENTATION OPTIONS AFFORDABILITY/WHOLE LIFE COST OF PROJECT COST OF IMPLEMENTING THE PROJECT SOURCE OF PROJECT FUNDING IMPACT ON FUTURE RESOURCE BUDGET (SAVINGS/COSTS) 21

7 5. ACHIEVABILITY PROJECT MANAGEMENT PROCUREMENT STRATEGY CONTRACT MANAGEMENT EVIDENCE OF SIMILAR PROJECTS, WHERE AVAILABLE CONTINGENCY PLAN APPENDICES 23

8 1. INTRODUCTION 1.1. BUSINESS NEED The Scottish Fire and Rescue Service (SFRS) currently operates 20 payrolls, 18 of which are provided by seven Councils via Service Level Agreements, with the other 2 being delivered internally within the former Strathclyde area. The current systems and HR/Payroll processes are based on existing employee terms and conditions from the legacy services. These arrangements are administratively burdensome and costly and will require to be updated to reflect the new pay and reward framework. Access to comprehensive management information is limited due to the dispirit nature of the underlying data. It is therefore considered a matter of priority to develop a single integrated HR/Payroll system, as cost effectively as possible, which incorporates the following functionality: Standard HR administrative processes to manage all employees, Reporting tools to manage workforce planning, Skills development and certification databases, Programming and management of training events, Self service capability to improve process efficiency, Integration of RDS payroll processing SPECIFIC PROJECT OBJECTIVES The project objectives and the weighting attributed to each are detailed below: 1. Standardised and streamlined HR/Payroll processes A key element of the project is to enable the standardisation and streamlining of HR and payroll processes to improve efficiency and effectiveness through Page 1 of 26

9 removing duplication of effort between HR and Finance and ensuring the source data is common. (30% weighting) 2. System can be set up to fully meet SFRS requirements It is important that the system can properly and fully reflect the SFRS organisational structure/pay and grading model and can capture all of the people information that is required, including those aspects which may be particular to the fire service eg training and competency records, and can integrate effectively with other organisational systems. (15% weighting) 3. Full control and flexibility of the system to enable SFRS to implement changes in organisational structure, reporting requirements etc. As an organisation which employs c.8,500 people it is essential that SFRS has full control over the system which contains its people information and can readily reflect changes in organisational structure in a controlled manner. A new Pay and Reward Framework will be developed in parallel with this project which may continue to evolve over the medium term. The solution being developed needs to be flexible enough to accommodate these changes. (15% weighting) 4. Capability to provide user-friendly and prompt access to comprehensive management information in a flexible format Similarly, people costs represent over 75% of SFRS expenditure and as such it is essential that the Service can readily access and analyse the information that supports this expenditure to inform budget management and longer term workforce planning. (30% weighting) Page 2 of 26

10 5. Can be delivered within a timescale that meets HMRC requirements As with all other employers, HMRC would generally expect to transmit tax related data to/from SFRS through a single employer reference. This is not technically possible under the current arrangements. During the reform process a number of discussions were held with HMRC and Scottish Government which resulted in HMRC granting SFRS a moratorium on implementing this requirement, as it was possible to demonstrate that plans were being made to comply over the medium term. The current expectation is that this will be achieved within approximately a 2-year period. (10% weighting) 1.3. CONTRIBUTION TO SFRS KEY OBJECTIVES This project is aimed at removing duplication while improving the efficiency and effectiveness of HR and payroll processes and is line with our operating plan objective: A1: To protect and improve local services, despite the financial cuts, by stopping duplication and not cutting front line outcomes. 2. STRATEGIC FIT 2.1. FUNCTIONAL OVERVIEW Responsibility for payroll lies with the Finance & Procurement Department within the Finance & Contractual Services Directorate, while responsibility for HR lies with the People & Organisational Directorate. In order to successfully deliver this cross-cutting project it will be necessary for both Directorates to work closely together towards the project objectives. Page 3 of 26

11 2.2. EXISTING ARRANGEMENTS The Scottish Fire and Rescue Service (SFRS) currently operates 20 payrolls, 18 of which are provided by seven Councils via Service Level Agreements with the other 2 being delivered internally within the former Strathclyde area. The current systems and HR/Payroll processes are based on existing employee terms and conditions from the legacy services. These arrangements are administratively burdensome and costly and will require to be updated to reflect the new pay and reward framework. Access to comprehensive management information is limited due to the dispirit nature of the underlying data. SFRS employees are paid on different cycles, 6519 (78%) are fortnightly, 1384 (16%) monthly and 509 (6%) four weekly. In addition, payrolls operate different pay periods, some are in arrears, others are a mixture of arrears and in advance. Different payrolls are often used for different employee types, wholetime, support, control staff, retained firefighters. An analysis of payrolls by service provider is tabled below, alongside the system supplier: Page 4 of 26

12 Service Provider No. of No. of Frequency Employees Payrolls Falkirk Council Fortnightly Dumfries & Galloway Monthly Council Fife Council weekly Aberdeenshire Monthly Council Highland Council 1,214 4 Fortnightly City of Edinburgh Fortnightly Council Monthly SFRS* 26 1 Monthly SFRS (former 3,191 1 Fortnightly Strathclyde) Dundee City Council Fortnightly TOTAL 8, *Relates to SLT and SFRS Board Members and transfers from Scottish Fire Service College The operation of different pay cycles leads to inefficiency of processes with multiple payroll files being managed throughout the month, reflecting the different pay periods. Changes to payroll information, eg pay awards, are often applied to different payrolls in different pay periods and staffing resources require to be maintained in multiple locations to support each separate payroll. A total of 22 people are involved in payroll processing across eight separate locations. The resources involved from SFRS vary by Council/former Fire and Rescue Service. Some Councils provide nearly all activities and processes with only limited input from SFRS employees, others provide the system only and processing is almost exclusively undertaken by SFRS staff. Typically HR processes have relied on spreadsheets and/or payroll information to support understanding of establishment or workforce planning. Page 5 of 26

13 The system in operation within the former Strathclyde area is an integrated HR/Payroll system that was procured in July 2010, on a hosted basis, for a seven year period, with an option to extend to 10 years. This system is considered to be fit for purpose and can deliver the business requirements outlined in paragraph 1.1. When the Strathclyde system was procured it was intended that this would be made available to all of the existing FRS s on a shared service basis. As such the procurement was undertaken in such a way that HR/payroll provision for the rest of the fire and rescue service in Scotland could be incorporated at some future point during the life of the contract. A relatively recent development was the introduction of skills development and training modules within Strathclyde which coincided with the opening of the new Training Centre at Clydesmill. This solution is now well developed and manages key information on training courses, matches individuals to respective courses, captures skills achieved, and can identify whether refresher training or future certification is required. In addition, an in house training programming tool was developed to manage the overall scheduling of training. HR Recruitment uses an externally hosted recruitment portal myjobsscotland to advertise and manage external recruitment. This is used on a national basis and is charged on an annual subscription. There are no plans to change this arrangement at this stage. Page 6 of 26

14 2.3. STAKEHOLDERS The key stakeholder groups in this project are as follows: POD and FCS Directorates, Existing Council service providers, Employee representative bodies, All employees, Payroll staff, Scottish Government, HMRC. It is recognised that employee representative bodies will have a keen interest in this project, both in terms of the payroll staff and more generally all employees who will be impacted to a greater or lesser extent. It is intended that the primary means of engagement with them will be through the Employee Partnership Forum. It is recognised that the group most affected by this project are the payroll staff, located throughout Scotland, who are being asked to maintain existing arrangements over a 2-year period, knowing that there is requirement to reduce numbers overall once the project is implemented, and having considerable uncertainty over their own personal future position CONSTRAINTS Reliance on transitional arrangements with Councils is a constraint and some have already intimated they would wish these to cease over the medium term as servicing SFRS requirements does not represent core business for them. Some are in the process of planning future upgrades to their systems and would like to ensure these arrangements are terminated before progressing with their upgrades. As highlighted in objective 5, there is a requirement to implement a single employer reference with HMRC within approximately the next 2 years. Page 7 of 26

15 2.5. DEPENDENCIES This project is highly dependent on securing sufficient technical and specialist resources with experience in this field. It is expected that this can be achieved by releasing appropriate staff from business as usual activities, backfilling their posts temporarily and also securing specialist support from an external provider. The solution is dependent on a suitable IT infrastructure to access payroll across SFRS. As the preferred option (paragraph 3.5) involves using a hosted web based system the main point of access is through the internet. Technical performance will therefore depend on internet speeds available at various locations. The solution will be developed in tandem with the project to develop new SFRS terms and conditions. This information is a prerequisite to the design work for the HR/Payroll system. It is recognised that some elements will need to evolve as this work progresses however this could lead to delays in the project delivery if not carefully managed. The project is dependent on the on-going availability of skilled and competent payroll staff to maintain existing arrangements and operate the new arrangements when implemented. It is recognised that there will be a reduced number of payroll staff required in future and this results in significant personal uncertainty for the individuals involved STRATEGIC BENEFITS The benefits are based on having standardised HR/Payroll processes for SFRS, enabled by a single integrated HR/Payroll system. Standardisation will promote common practices across SFRS and a consistent service from HR and Payroll. Process efficiency will reduce the time it takes to implement changes, will improve overall quality of information and provide a single source for HR and payroll information as opposed to the current eight service providers. Page 8 of 26

16 The project will enable improved data integrity to manage workforce planning and move away from the current inefficient spreadsheet based approach with high risk of error. Reporting will be improved and greater analysis of information will be available for decision making. SFRS has already made a significant investment in developing the training events module and scheduling tool for the Clydesmill Training Centre to enable efficient planning and management of frontline training. This can be extended to cover other training campuses across Scotland. The ability to use self-service across SFRS will provide managers with sufficient information online to manage their staff and for employees to update their own personal information. This will release HR administration resources from completing these tasks to focus on other activities. Implementing a solution that meets the project objectives will enable SFRS to implement people/payroll changes more timeously and the cost of service provision can be reduced substantially by consolidating to a single monthly payroll, thereby reducing the number of internal staff required to deliver this function STRATEGIC RISKS The strategic risks to successfully implementing this project are described in the table below, alongside the mitigating actions that are planned to manage these risks: Page 9 of 26

17 Risk Time taken to reach agreement on harmonised terms and conditions is longer than anticipated. Existing payroll staff leave, reducing our capacity to support the current arrangements. Project resources cannot be secured to implement the solution. Transitional Funding for 2015/16 cannot be secured. Cash flow advances are charged to Resource budget Pay is disrupted for employees Councils are unwilling to continue with the transitional arrangements until the proposed migration date for their area. The project takes longer than anticipated to deliver. Mitigation Key areas of agreement identified, solution design builds some flexibility to incorporate change in terms and conditions. Process mapping of current arrangements is currently being undertaken to enable flexible deployment of remaining staff. Line management has been centralised to facilitate this approach and ensure any resource gaps issues are identified early. Project plan and commitment from both POD and FCS Directorates to resource the project appropriately and backfill resources where required. On-going discussion with Scottish Government. On-going discussion with Scottish Government. Phased approach planned whereby a limited number of employees are transferred at a time. Migration plan will take account of exit requirements of each Council and can be flexible to accommodate changes. A robust project plan will be developed by the project manager and agreed with supplier and key stakeholders from HR and Finance. Robust project management will be implemented to ensure the project stays on track. Page 10 of 26

18 HMRC is unwilling to extend dispensation to operate multiple employer references beyond 31 March Anticipated savings anticipated are not realised. Good working relationships have already been established with HMRC and regular dialogue on progress will be maintained. Benefits realisation plan is agreed and savings tracked during implementation CRITICAL SUCCESS FACTORS This project will be considered a success if, all employees have been migrated to the new arrangements with no disruption to pay, payroll staff have either been matched into new roles or have been able to access redeployment or voluntary severance, the system is functioning efficiently and effectively, the foundations are in place to deliver comprehensive, accurate and up to date people information, which is not diminished by organisational changes SCOPE: MINIMUM, DESIRABLE, AND OPTIONAL DO MINIMUM Continue with existing arrangements, subject to agreement of Council providers. DESIRABLE The desired option is to develop an integrated HR/Payroll solution for SFRS which is considered the most cost effective way to achieve the required objectives. OPTIONAL There are several ways to achieve a single integrated HR/Payroll solution and these are elaborated within the options considered at paragraph 3.1. Page 11 of 26

19 3. OPTIONS APPRAISAL 3.1. LONG AND SHORT LIST OF OPTIONS The following list of options has been identified: Option 1 Do Minimum Option 2 Existing Contract New Pay Model Monthly Option 3 - Existing Contract New Pay Model Fortnightly Option 4 Existing Contract - Lift and Shift Option 5 - Procure New Solution Option 6 Council Shared Service Option 7 - Outsource 3.2. OPPORTUNITIES FOR INNOVATION / COLLABORATION WITH OTHERS Opportunities for innovation and collaboration have been considered within the list of options RISK QUANTIFICATION AND SENSITIVITY ANALYSIS The risks associated with each option will be elaborated within the options appraisal at paragraph DETAILED OPTIONS APPRAISAL Appendix A provides a detailed option appraisal incorporating both financial and non-financial considerations in evaluating each of the undernoted options. Option 1 Do Minimum Do Minimum would involve continuing with the existing arrangements. This could enable some standardisation and streamlining of processes however it would be limited to what can be achieved within each Council s system and the extent to which it ties in with their operating procedures. Page 12 of 26

20 There would be no scope to make savings as staff would require to be maintained to service each of the arrangements. There would be no scope to change the setup of the system to meet SFRS requirements and there would be very limited control or flexibility to make changes as the Service evolves its organisational structure. It is already proving difficult to make changes to costing files, element codes etc. This option would not enable compliance with the HMRC requirement of a single employer reference. There would also be a requirement to undertake a procurement exercise for this service in the medium to long term as it would be difficult to justify continuing to award the work to the Councils without competition. It should also be noted that there is a high risk of being unable to deliver this option as several Councils have already indicated their preference to move away from this as soon as possible. Option 2 Existing Contract New Pay Model Monthly This option is to use the HR/Payroll solution procured and implemented by the former Strathclyde Fire and Rescue as a vehicle for a single HR/payroll solution for SFRS. The contract has been confirmed as suitable for use in these circumstances. This solution offers a proven integrated solution for Fire and Rescue which increases efficiency between HR and Payroll. The solution already covers the functionality required as part of the business requirement. This approach leverages the investment made previously and accelerates the implementation of the SFRS solution. This option enables the system to be set up to meet SFRS requirements and offers full control and flexibility to implement future changes. It has been proven to deliver sound management information. Page 13 of 26

21 This option offers the lowest risk as the system is known and proven and there are a number of SFRS staff who have implemented it before. This approach leverages the investment made previously and accelerates the implementation of the SFRS solution. Option 3 - Existing Contract New Pay Model Fortnightly This option offers most of the benefits of Option 2 however delivers reduced processing efficiency as twice as many payments require to be made in the year, with all the associated verification, costing files, reconciliations etc., thereby reducing the savings that can be made over time. The increased cost of this approach has been estimated at 100,000 per annum. Option 4 Existing Contract - Lift and Shift This option involves lifting existing processes, procedures and pay models from the existing arrangements and shifting them into a new SFRS HR/payroll system. The benefit of this approach is that savings can be made from existing Council service charges without having to develop a new SFRS pay model, however the complexity of replicating multiple pay models in the new system would require significant time and effort from the project team, who would require to do it all again once the new pay model was developed. Overall this project would be expected to take four years, design build and test each of the existing HR/Payroll elements and migrate to SFRS and then reimplement a new single solution on new terms and conditions. In the meantime the existing staffing structures would require to remain in place to operate the multiple pay models. This option carries a higher risk of disruption to pay due to the added complexity of a two stage transition and the need to accurately mirror multiple local arrangements. Page 14 of 26

22 Option 5 - Procure New Solution This option would be expected to deliver a fit for purpose solution, however would require a minimum 3-month procurement process to appoint a supplier before design and implementation can begin. There is added risk here of delay or failure as the supplier, system and contractual arrangements are unknown. In addition the significant time and resource investment that has been made in the existing system, which is fit for purpose, would be lost. It is considered that the same benefits can be achieved more quickly and cost effectively under Option 2. Option 6 Council Shared Service This option was considered as there may be economies of scale to be realised from operating a solution using existing Council resources rather than deploying SFRS resource, and the implementation risk could be shared between SFRS and Council. The downside however is that a Council solution is unlikely to meet all of SFRS needs, in particular around training functionality. In addition, the Council would not offer the flexibility required to adopt new SFRS terms and conditions and to implement future organisational changes. This option would still require a procurement process and Councils would need to compete with commercial providers for whom HR/payroll solutions is their core business. Page 15 of 26

23 Based on current charges it would appear that Council costs are prohibitive in comparison to alternatives. Option 7 Outsource This option would pass the risk of implementation to the outsource provider and contractual arrangements would be put in place to provide standardised service levels. The provider would however realise the benefits from consolidating HR/Payroll provision and offset this against project implementation costs. Any future changes to the provision of service would be contractually based and would affect overall cost of service. This approach would be more attractive once SFRS terms and conditions have been established and organisational change in line with fire reform has been completed. To outsource at this stage would be to allow a private contractor to reap the consolidation benefits rather than SFRS and charge change costs where evolving requirements differ from the original specification. This approach could be re-considered at the end of the existing contract once SFRS has implemented an end state operating model. The savings are estimated at 25% of existing service cost however it is anticipated that the outsource provider would incorporate in their pricing the cost of redundancy of the existing staff if they were to TUPE transfer to that organisation. Based on previous experience it is considered unlikely that they would retain the existing staff in employment PREFERRED OPTION Option 2 Existing Contract New Pay Model Monthly achieves the highest combined score at 94% and as such is the preferred option. This option maximises the annual savings to SFRS and offers a payback within 8 years. In addition it leverages the investment already made in an HR/Payroll solution and accelerates the project. Page 16 of 26

24 3.6. IMPLEMENTATION OPTIONS This is a significant and complex project that requires redesign of HR and Payroll processes in line with future SFRS terms and conditions. It will be delivered in phases to maximise realisation of benefits as early as possible, balanced with the risks around delivering a complex project throughout which we require to continue to pay our employees accurately and timeously. The key phases of the project are design, test, and then migration and implementation of the solution. In designing the SFRS system the project team will work from the Strathclyde design and identify areas for improvement and opportunities to increase efficiency, rather than starting to implement a system from a blank canvas. A key area for development will include retained payroll and linkage with retained availability systems. It is envisaged that HR/Payroll staff across all locations will be involved in the redesign to ensure processes developed meet overall SFRS needs. In comparison to a straightforward system implementation, there is added complexity to migrate the existing HR and payroll details from each of the former Services. In order to transfer individual records seamlessly onto the new SFRS environment while at the same time changing the pay cycle requires individual planning and testing to be undertaken for each of the 20 payrolls. There are elements of the HR design that can be implemented early on, for example the delivery of workforce planning and the roll out of the training programme and learning events functionality. This will deliver early process improvements in managing training, overall establishment, and the ability to analyse and report information to improve workforce planning. Page 17 of 26

25 The initial high level project plan is highlighted in the diagram below. The anticipated timeline is approximately two years; to achieve this will require separate teams to migrate HR & Payroll information from each existing arrangement. This approach will minimise the transition impact and enable communication to be focused on affected employees. Months Project Team Design and Build Solution Implementation of HR workforce planning and Training Events Team 1 HR/Pay FRS 1 Team 2 HR/Pay FRS 2 Team 3 HR/Pay FRS 3 Team 1 HR/Pay FRS 4 Team 2 HR/PayFRS 5 Team 3 HR/Pay FRS 6 Team 1 HR/Pay FRS 7 Team 2 HR/PayFRS 8 Team 3 Bed in/contingency HR/Pay FRS describes one of the former fire and rescue services that need to be migrated The key project milestones are indicated below: Month 1 Month 4 Month 6 Month 9 Month 13 Month 17 Month 18 Month 21 Month 24 As Is analysis of HR and Payroll To Be Design of HR and Payroll including workforce planning and Training Events Build solution Test solution 3 service migrations completed 6 service migrations completed Implementation of workforce planning and training events 8 service migrations completed Embed new solution and closedown of project Page 18 of 26

26 It is currently anticipated that the number of staff required to operate the payroll will reduce from 22 to approximately 15 based on benchmark information. Detailed design work will recommend the operating model and processes to be adopted which will confirm the resources required to manage a single payroll. 4. AFFORDABILITY/WHOLE LIFE COST OF PROJECT 4.1. COST OF IMPLEMENTING THE PROJECT Appendix B details the cost of implementing the project, which amounts to million and has been accounted for in a Transitional Funding bid. The people resources require to implement the project will be 2-fold; an internal team including both HR and Finance specialists led by a project manager, and secondly external contractors from the system provider who have the specialist knowledge of implementing this system across their client base. The internal project manager is critical to the overall project success and requires significant HR, payroll and project management experience in implementing similar projects. A key aspect of this role will be to manage the resources in line with estimated project costs. It is currently anticipated that this will be an external fixed term appointment. In addition an internal project team of approximately 16 staff will be required over a 2 year period. This team will be involved in the design, testing, training and migration of HR/Payroll information. It is anticipated that the design team will be smaller (up to 9 people) and only at migration would there be a need to increase resources. Supplier support would be engaged to provide system development skills for the design, build and testing phases. This would require to be procured directly from the supplier as they would not permit a third party to provide solution advice or amend configuration of their software. There would also be a contractual requirement to procure sufficient project management resource from the supplier to minimise risk and ensure delivery to timescales. Page 19 of 26

27 Based on advice from the supplier it is currently anticipated and budgeted that the resource requirement will be between 400 and 500 days, however there is scope to reduce this by providing sufficient internal resources and in particular utilising those who have experience of the previous implementation to minimise training requirements and also to leverage previous project experience. It is not anticipated that the external contractors will be required beyond the design and test phases as the individual migrations will be managed by SFRS, however provision has been made to call off if more external resource is subsequently required. The retention of current payroll staff is critical to maintain existing arrangements during the transition period however this needs to be balanced with future resource needs and treating staff fairly and equally. Staff who wish to pursue other opportunities within SFRS during this period will be supported to do so and backfilled by offering temporary posts to cover payroll. Where members of staff resign from SFRS their posts will similarly be filled on a temporary basis. In addition, it is recommended that a small number of voluntary severance/redundancy arrangements are offered and agreed for 2015/16 to retain staff that are happy to support transition but would be willing to leave once the transition of payrolls for their area has been completed. In effect this would be a commitment from 2015/16 budgets. A provision of 250,000 has been included in business case which may be required depending on take up and opportunities to redeploy staff. The total project costs are summarised in the table below: Project Costs Year 1 ( ) Year 2 ( ) Total ( ) Internal project team 423, ,324 1,034,121 External project costs 772, , ,000 Voluntary severance 250, ,000 Contingency (10%) 85,000 75, ,000 Total 1,280,797 1,137,324 2,418,121 Page 20 of 26

28 4.2. SOURCE OF PROJECT FUNDING The Board has approved in principle 1.281million from the 2013/14 Transitional Funding allocation, with indicative costs for 2014/15 of 0.936million, which excluded provision for voluntary severance. Appendix B shows how the 2-year project timetable will fall within financial years, based on a project start date of 1 st October It should be noted that this results in 548,000 less expenditure in 2013/14 than budgeted, some slippage from indicative costs in 2014/15, and 725,000 of expenditure occurring in 2015/16 for which there is currently no transitional funding allocation. Discussion is currently on-going with Scottish Government to identify ways to accommodate this change in cash flow. The transfer to monthly pay for c.6,500 employees will require an advance of up to two weeks salary which would be recovered over a period to be agreed in consultation with employee representative bodies. Discussion is currently ongoing with Scottish Government to ensure that this will not adversely impact our Resource Budget where there is an element outstanding at the end of a financial year IMPACT ON FUTURE RESOURCE BUDGET (SAVINGS/COSTS) Appendix C details the impact on future resource budgets. This shows that there will be a nil impact on Years 1 and 2 as the project is on-going and existing payroll arrangements will require to continue, however from Year 3 there will be an initial annual saving of 424,000, reflecting significant savings on Council charges and an initial reduction in staff numbers. It is anticipated that further staff cost savings will be achievable from Year 5 when the new arrangements are bedded in and we can begin to work towards recognised best practice benchmarks for payroll processing costs. Page 21 of 26

29 While it has not been possible to quantify at this stage, it is also anticipated that the standardisation of HR processes will remove duplication of effort, and therefore cost in collating this information. By Year 8 the initial investment has been paid back in quantifiable savings generated, while making a significant improvement in the availability of management information and enabling organisational change to be implemented in a controlled manner. 5. ACHIEVABILITY 5.1. PROJECT MANAGEMENT The project will adopt standard Prince 2 methodology with appropriate governance arrangements through a Project Board and regular reporting through the Service Transformation Programme. This methodology requires that project risks and issues are managed and escalated to the project board as required PROCUREMENT STRATEGY Given the availability of an existing contract for an HR/payroll solution, as outlined in paragraph 2.2, which is fit for purpose, and the use of which in these circumstances has been confirmed by procurement specialists to be compliant with procurement regulations, it is intended that this will be utilised and varied to reflect that the service is now being provided as a single instance to one organisation, rather than on a shared service basis CONTRACT MANAGEMENT As a business critical service this contract will be actively managed by the Head of Finance & Procurement through regular contract monitoring meetings with the supplier. Page 22 of 26

30 5.4. EVIDENCE OF SIMILAR PROJECTS, WHERE AVAILABLE A similar HR/Payroll system implementation was successfully completed by the former Strathclyde Fire and Rescue Service in Most of the staff involved have transferred to SFRS, with the key players in senior positions within both the POD and FCS Directorates. As such it can be demonstrated that as an organisation we have the necessary experience of this type of project and the learning achieved previously can be applied to improve our approach. The additional complexity in this case is the multiple migrations and the design work on new terms and conditions. The breaking down of the project into phases will help monitor project progress and will give clear insight if corrective action is required throughout the project lifespan CONTINGENCY PLAN The key contingency for this project is to continue with existing arrangements until such time as the transition can be completed. Specific arrangements will be put in place with each of the existing providers during the planning and migration process. The initial migration sequence will be designed to maximise benefits and provide a balanced programme of work. This can be altered if priorities change, for example a requirement from a particular provider to make changes earlier or later. 6. APPENDICES The following appendices are attached to this document: Appendix A Option Appraisal Appendix B Project Cost Analysis by Project Year and Financial Year Appendix C Impact on Future Resource Budget Page 23 of 26

31 SCOTTISH FIRE AND RESCUE SERVICE HR/Payroll Project - Options Appraisal Combined Financial and Non-financial Scoring Results for Options Financial Non-Financial Combined Options 50% 50% 100% NPC 000's Score Points Score Score 1 Do Minimum 9,754 45% % 53% 2 Existing Contract - New Pay Model 8,813 50% % 94% 3 Existing Contract - New Pay Model (Fortnightly) 9,473 47% % 89% 4 Existing Contract - Lift and Shift 11,208 39% % 66% 5 Procure new Solution 9,252 48% % 91% 6 Council Shared Service 9,533 46% % 77% 7 Outsource 10,253 43% % 80% September 2013

32 Appendix A SCOTTISH FIRE AND RESCUE SERVICE HR/Payroll Project - Options Appraisal Financial Appraisal Option 1 - Do Minimum 000 (base case) year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 Service Costs D&G Council Fife Council Aberdeenshire Council Falkirk Council Dundee City Council Highland Council Edinburgh City Council External Provider sub-total Service Costs Staff Costs Dumfries Thornton Aberdeen Maddiston Dundee Hamilton Inverness Edinburgh sub-total Staff Costs Nominal cashflow % Discounted cashflow Cumulative DCF Net Present Cost: 9754 discount factor

33 Appendix A SCOTTISH FIRE AND RESCUE SERVICE HR/Payroll Project - Options Appraisal Financial Appraisal Option 2 - Existing Contract - New Pay and Conditions Model - Monthly 000 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 Service Costs D&G Council Fife Council Aberdeenshire Council Falkirk Council Dundee City Council Highland Council Edinburgh City Council External Provider sub-total Service Costs Staff Costs Dumfries Thornton Aberdeen Maddiston Dundee Hamilton Inverness Edinburgh SFRS sub-total Staff Costs Setup Costs 216 Project Costs Nominal cashflow % Discounted cashflow Cumulative DCF Net Present Cost: 8813 discount factor

34 Appendix A SCOTTISH FIRE AND RESCUE SERVICE HR/Payroll Project - Options Appraisal Financial Appraisal Option 3 - Existing Contract - New Pay and Conditions Model - Fortnightly 000 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 Service Costs D&G Council Fife Council Aberdeenshire Council Falkirk Council Dundee City Council Highland Council Edinburgh City Council External Provider sub-total Service Costs Staff Costs Dumfries Thornton Aberdeen Maddiston Dundee Hamilton Inverness Edinburgh SFRS sub-total Staff Costs Setup Costs 216 Project Costs Nominal cashflow % Discounted cashflow Cumulative DCF Net Present Cost: 9473 discount factor

35 Appendix A SCOTTISH FIRE AND RESCUE SERVICE HR/Payroll Project - Options Appraisal Financial Appraisal Option 4 - Existing Contract - Lift and Shift 000 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 Service Costs D&G Council Fife Council Aberdeenshire Council Falkirk Council Dundee City Council Highland Council Edinburgh City Council External Provider sub-total Service Costs Staff Costs Dumfries Thornton Aberdeen Maddiston Dundee Hamilton Inverness Edinburgh SFRS sub-total Staff Costs Setup Costs 216 Project Costs Nominal cashflow % Discounted cashflow Cumulative DCF Net Present Cost: discount factor

36 Appendix A SCOTTISH FIRE AND RESCUE SERVICE HR/Payroll Project - Options Appraisal Financial Appraisal Option 5 - Procure New Solution 000 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 Service Costs D&G Council Fife Council Aberdeenshire Council Falkirk Council Dundee City Council Highland Council Edinburgh City Council External Provider sub-total Service Costs Staff Costs Dumfries Thornton Aberdeen Maddiston Dundee Hamilton Inverness Edinburgh SFRS sub-total Staff Costs Setup/Termination Costs Project Costs Nominal cashflow % Discounted cashflow Cumulative DCF Net Present Cost: 9238 discount factor

37 Appendix A SCOTTISH FIRE AND RESCUE SERVICE HR/Payroll Project - Options Appraisal Financial Appraisal Option 6 - Council Shared Service 000 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 Service Costs D&G Council Fife Council Aberdeenshire Council Falkirk Council Dundee City Council Highland Council Edinburgh City Council External Provider sub-total Service Costs Staff Costs Dumfries Thornton Aberdeen Maddiston Dundee Hamilton Inverness Edinburgh SFRS sub-total Staff Costs Termination Costs 216 Project Costs Nominal cashflow % Discounted cashflow Cumulative DCF Net Present Cost: 9533 discount factor