Reseller News

SAP as-a-service to push MBIE towards Holidays Act compliance

Shift to new payroll software is in part driven by enforcement action from MBIE's own Labour Inspectorate
SAP has beaten the pack to supply new payroll systems to MBIE

SAP has beaten the pack to supply new payroll systems to MBIE

SAP has beaten two other software-as-a-service (SaaS) providers to win a Ministry of Business Innovation and Employment tender for replacement payroll software.

The Ministry, which is subject to an enforceable undertaking from its own Labour Inspectorate to fix historic Holidays Act payroll errors, told Reseller News that it had engaged the German software giant to provide a configured, off-the-shelf, as-a-service system.

"In the tendering process SAP demonstrated a significant amount of experience providing the same or similar services to organisations comparable to MBIE in terms of size and complexity," a spokesperson said.

"We are now working with them on an implementation programme which is a planned go live in fourteen months."

The cost to design, test and implement a new payroll system is estimated at $15 million to $18.5 million, including vendor costs.

In its 2018 annual review, MBIE told a Parliamentary committee the Enforceable Undertaking resulted in the establishment of a project team to calculate the Ministry's historic Holidays Act pay liability and the creation of a standalone calculator to run alongside the existing fortnightly pay cycle.

In addition, MBIE was part way through the procurement of a new payroll system.

MBIE was far from alone in its payroll deficiencies after systemic errors were first discovered in 2014. Many other government agencies and private companies also encountered trouble interpreting the correct way to calculate holiday entitlements.

In 2016, it was revealed the Ministry of Justice, along with Police; District Health Boards and a host of others fell foul of the law and potentially shortchanged staff.

In August, media company Stuff reported its results including a $3.4 million provision for recalculating staff holiday pay entitlements.

MBIE launched a request for information in July 2017 that resulted in 10 responses with a mix of both capital and cloud-based payroll solutions. The request for proposal was completed in April 2018 producing a shortlist of three potential providers, all cloud-based.

"The expenditure that was expected to commence in the 2017/18 financial is now going to occur in 2018/19 and be solely operating spend," MBIE told the review committee.

In December, MBIE told Reseller News an initial estimated budget of $2.65 million was developed to cover the project initiation phase and was funded from MBIE’s existing baseline.

Meanwhile, $7 million of additional funding was secured during Budget 2018 for future spend while the implementation business case, including the final budget, was being finalised.

MBIE is progressively calculating and paying its historic holiday pay underpayments.

"The majority of current staff received payments in November," it said. "We expect to remediate affected former staff early in 2019, once we’ve sourced and validated the required personal details from individuals."