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New Zealand – Talent2 to pay millions to exit contract

30 July 2014

Australian payroll software company Talent2 will soon exit a New Zealand schools payroll contract, with the New Zealand Government preparing to take full control of the problematic project, reports zdnet.com.

New Zealand Prime Minister John Keys advised that after pouring NZD 45 million (USD 38.3 million) in to fix the system, the teachers’ payroll system, Novopay, is no longer, as previously described by ministers, “a dog” and teachers will be thankful that the government has taken it over. 

Talent2 has been maintaining the Novopay website on behalf of the Ministry of Education’s Education Service Payroll team.

A statement released by the minister in charge of fixing Novopay, Steven Joyce, said following lengthy negotiations, the Ministry of Education and Talent2 have settled on the amounts payable by Talent2 towards the costs of remediating the Novopay service, and on a new operating model.

Talent2 will pay the Ministry between NZD 18 million (USD 15.3 million) and NZD 22 million (USD 18.7 million), made up of NZD 7 million (USD 6 million) in cash and other considerations; including a license for the core software, and support and maintenance.

The Ministry will obtain full ownership of the customisations of the software created for the Novopay project, valued by Talent2 at between NZD 15 million (USD 12.8 million) and NZD 18 million (USD 15.3 million). The customisations were funded by the Ministry through its contract.

The new model involves a new government-owned company taking over the operation of the payroll service and Talent2 licensing the core software to that company.

Mr Joyce commented: "Talent2 was not prepared to provide the extra resources that are necessary for further development of the system within the current contractual arrangements.”

Since its launch in August 2012, many teachers and school staff have been unpaid, overpaid, or underpaid. School administrators have already received NZD 6 million (USD 5.1 million) in compensation for the extra costs incurred in using the system.

Talent2 said the change, which will come into effect in October, allows Talent2 to better focus resources on its core payroll business and broader New Zealand client base.

In a statement, Talent2 advised: "The decision has been reached by mutual agreement in support of a new service delivery model and settles a flawed contractual arrangement between the parties, which was found in the June 2013 Ministerial Inquiry as not fit for purpose.”

Financial accounts for the year ending 30 June 2011, filed by Talent2 in New Zealand, revealed that the company has already reported that it lost over NZD 20 million (USD 17 million) on the contract.

Earlier this month, US-based Allegis Group announced it had acquired Talent2.