The Queensland Health payroll system will cost the state government $1.25 billion during its implementation between 2010 and 2017; however, that cost might only be the beginning.
The costings have come from an audit of the project carried out by KPMG. Of the cost, $1 billion relates to business-as-usual payroll operations to ensure that staff continues to be paid every two weeks; $220.5 million relates to project costs to fix key issues; and $25 million relates to system analysis, to find a long-term answer to the payroll problem via either upgrade or reimplementation.
This includes the $416 million that has been spent between the 2010 and 2012 financial years, while $836.9 million is forecasted for the financial years from 2013-17. KPMG said that the difference between what the payroll system was originally expected to cost, and how much it is now forecasted to cost, is about $530 million — just to maintain the status quo.
Unfortunately, costs for Queensland Health are likely to rise if the system is to be future-proofed. Support for the Workbrain and SAP systems runs out in 2014 and 2015, respectively, meaning that a either a reimplementation or an upgrade of the systems will soon be necessary. The number of customisations in the systems also has to be considered, as KPMG thinks that there are too many, which increases risks. Workbrain now has 1029 customisations, while SAP has 1507 customisations.
"Even though significant progress has been made in stabilising the QH payroll system, the system remains 'fragile' in the sense that any system changes that are introduced have the potential to impact on pay outcomes," KPMG said.
"The degree of customisation of the current payroll and award-interpretation systems has created complexity that makes the potential impacts of new releases and system changes difficult to predict."
The $25 million system analysis should result in an approach to market to address the issues, KPMG said, but there will be further costs involved.
Queensland Health also put a moratorium on health workers who were overpaid due to hiccups with the implementation of the new system, and KPMG did not include any costs that would be incurred if the department does not get these overpayments back. Based on calculations made in April, this cost would be $110.4 million.
"That is a bare-bones price. It does not include even one cent as a contingency provision, and that could increase allocations necessary for coming repair projects by 30 per cent or more. Nor does it include all the money already spent. There is the as-yet unknown cost of fringe-benefits tax, and there is no provision for a necessary upgrade or re-implementation of the system before licence support ends in 2014-15," Health Minister Lawrence Springborg said.
"These hundreds of millions of dollars should be available today to help sick Queenslanders. Instead, they are dollars wasted by the former government, and marked for consumption by a sick payroll system."
IBM was engaged to help implement an SAP payroll system and a Workbrain award engine, in replacement of Queensland Health's existing Lattice system, which that was coming towards the end of its support. When the new systems were implemented by IBM in 2010, there was chaos as workers were unpaid, underpaid or overpaid.
Queensland payroll is noted to be a "uniquely complex" system, KPMG said; it currently involves 85,000 employees who are covered by 12 different industrial awards and affected by six different industrial agreements.
There are 24,000 different pay combinations each fortnight, the auditor said.
The Queensland Government has estimated that approximately 200,000 manual processes are required to process 92,000 forms on average within the payroll hubs every fortnight, which requires 1000 staff to complete the task.
To exacerbate matters, payroll was centralised not long before IBM's implementation of the new payroll software in 2010 — meaning that payroll officers had to make sense of pay information without local knowledge of the complexities.
Key problems needing to be addressed, as identified by the auditor, include:
The ability of staff to be paid for work done up to six years ago
The disconnect between central payroll staff and local payroll teams
The length of time between the payroll date and the end of the roster, which results in managers currently estimating how many hours employees will put in, leading to inaccuracies in pay
The impending separation from Queensland Government shared services, which KPMG said is likely to occur by the end of this year
Regaining overpayments back from staff
Introducing electronic rostering for managers, who currently manually create rosters that are then the main input for the payroll system
Conducting payroll system fixes; as of 2 May 2012, there were 570 logged system issues, 76 of which are identified as having the potential to impact staff pay
The reimplementation or upgrade of the SAP and Workbrain systems
Finding funding: between 2013-17, 64 per cent of the money required for the plan does not have approved funding.
The auditor has recommended that the department also develop a forward strategy for the system; adapt governance frameworks to assure improved performance; make sure that changes are both tested and run by stakeholders; and find funding for necessary work programs.