Agenda item

Purpose of the item: To learn lessons with respect to off-boarding by reviewing the process, in particular timing and communication, and the consequences for MATs and the Council.

Witnesses:

David Lewis, Cabinet Member for Finance and Resources

Anna D’Alessandro, Director of Finance Corporate and Commercial (Interim s151)

Tom Holmwood, Head of HR Operations

Key points raised during the discussion:

1. A Member asked what background information and analysis the Cabinet decision to stop providing the payroll service to Multi-Academy Trusts (MATs) and academies was based on. The Cabinet Member for Finance and Resources explained that the Council was in the process of transitioning from SAP to Unit4 and there was awareness of the challenges. The Enterprise Resource Planning (ERP) systems were based on a set of standard processes which were rolled out to all users including MATs.  A gradual move away from the payroll service by the MATs had already started over the previous 18 months. MATs were independent businesses that had no obligation to use the Council’s payroll service. An Accent survey, carried out in 2022 to understand MATs’ views of SCC’s payroll service, contributed to the decision. Three different options were prepared to determine how the Council would proceed; continue to deliver a payroll service with investment;continue the payroll service only for maintained schools; deliver corporate service only. It was decided to continue the payroll service only for maintained schools and MATs were given more than the statutory notice of termination of the service. The Cabinet Member believed that transition of MATs from the Council’s payroll service to independent services went well, and the necessary support was provided.

2. The Director of Finance Corporate and Commercial (Interim s151) reiterated that the transition went smoothly. The 2022 survey portrayed a deterioration in the payroll service provided to MATs and set off a chain of events. By the time the Cabinet report was delivered, there was already a significant reduction in the income from MATs and Academies and the assumption was that this would continue. Financial implications were mapped against a set of strategic criteria such as reputational impact and customer service.

3. The Member asked specifically what budget implications were considered.The Director of Finance Corporate and Commercial (Interim s151) explained that an options appraisal went to Cabinet, with around eight options reduced to three viable options. To continue providing the payroll service to MATs required a £600,000 investment of one-off project costs and ongoing costs to set up and maintain the MATs. To get the service fit for purpose, there was a request for another two full-time equivalent administrator posts, costing £80,000 on an ongoing basis. The budget was also in an overspend position. The income budgeted from the MATs was £1.2 million, on a declining trajectory. When the options were taken to Cabinet, the Council had already received notice of £400,000 loss of income, and an assumption of another £400,000 loss was made, forecasting an ongoing deficit at the end of 2024/25.

4. A Member asked why only 30% of Academies and MATs were satisfied with the service. The Director of Finance Corporate and Commercial (Interim s151) explained it was due to several reasons such as a lack of effective management and oversight; lack of good processes; lack of resource planning; and lack of effective use of technology, such as a macro being used that was not fit for purpose. The maintained schools followed the Council’s terms and conditions and had the same pay dates, whereas the MATs had different pay dates, different terms and conditions and other requirements. These operational issues caused many problems.

5. The Cabinet Member for Finance and Resources noted the principle of whether local authorities should run a payroll service for MATs, that were independent organisations with separate requirements. There were other specialist payroll providers available in the market that could meet MATs requirements.

6. The Member asked if the operational issues highlighted should had been fixed long ago and suggested if it had been, income could have been generated. The Director of Finance Corporate and Commercial (Interim s151) agreed. By the time the issues were brought to her attention, the income was on a declining trajectory. The Council was not in the business of providing a payroll service. Maintaining MATs would have required a lot of change and investment to deliver a good service.

7. A Member asked if learning had been taken from other local authorities who dealt with the same situation and successfully kept MATs on the payroll service. The Director of Finance Corporate and Commercial (Interim s151) could not provide a definitive answer, but there was no known recent learning. The Council was now ensuring it looked at other organisations and how payroll was dealt with. It had become apparent that a lot of local authorities were withdrawing from providing a payroll service to MATs due to its complexity, and in consideration that it was not a usual service for local authorities to provide.

8. A Member asked for an elaboration on what market research was carried out in spring 2022 and if it could be shared with the Committee. The Director of Finance Corporate and Commercial (Interim s151) agreed to share the Accent report with the Committee.

9. A Member asked why there was there a time lag between when the market research was completed, in spring 2022, and when it was taken to Cabinet, in May 2023. The Director of Finance Corporate and Commercial (Interim s151) explained that after the market research, the resources team and Head of HR Operations wanted to improve the payroll service. Within six months of this, it was clear that the payroll service provided to MATs could not be improved. Another issue had occurred with statutory maternity pay which caused some anxiety with the schools. It also became clear that the confidence of a lot of the MATs was irrecoverable. There was also several months to complete a detailed options appraisal to go to Cabinet.

10. A Member asked if the decision to stop providing the payroll service to bureaus could had been taken sooner than May 2023. The Director of Finance Corporate and Commercial (Interim s151), explained that a quicker decision could had been made if the Accent Survey was commissioned sooner and six months had not been taken to try and improve the service. The statutory maternity pay issue also did not arise until December 2022. It would have been better to take the decision to Cabinet before the start of 2023.

11. A Member asked if any consultation with the MATs took place prior to the Cabinet decision. The Director of Finance Corporate and Commercial (Interim s151) confirmed there had been no consultation beforehand.

12. The Member asked if all the MATs were contacted. The Cabinet Member for Finance and Resource explained that 105 education settings were interviewed as part of the accent survey but did not know what proportion this was.

13. The Director of Finance Corporate and Commercial (Interim s151), confirmed that the Council had stopped using the SAP system for payroll as of December 2023 and the transition to Unit4 was successful. A Member asked if the Council was currently providing payroll services to any external organisations and was informed that only maintained schools and corporate employees were currently supported by the Council’s payroll service.

14. The Member requested insight into the level of payroll queries the Council was receiving, compared with 2023, and if there was a clear methodology for a customer to report an issue with the payroll service. The Head of HR Operations said the number of payroll queries had doubled since last year’s but was now on a downward trajectory. The way the Council received payroll queries had been redesigned to ensure that all queries, from whichever direction, went through the helpdesk. This provided better statistics and allowed visibility of root cause of problems. The Cabinet Member for Finance and Resources noted the school clinics being run for schools, were ensuring a better level of engagement and support for schools. The Director of Finance Corporate and Commercial (Interim s151) added it was recognised that communication with schools could had been better. There was now a forum in place to communicate with schools since Unit4 went live. There were now subgroups from the Head of HR Operations’ team that meet separately with headteachers to discuss any issues and resolutions.

Actions:

1. The Director of Finance Corporate and Commercial (Interim s151) to share the 2022 Accent report on payroll customer satisfaction.

2. Accent surveyed 105 education settings; The Director of Finance Corporate and Commercial (Interim s151) to provide what proportion of SCC’s academy customers participated in the survey.

3. The Head of HR Operations to provide how many payroll queries the Council is receiving per month since Unit4 went live and how this compares with the same period last year.

Resolved:

The Resources & Performance Select Committee welcomes the improved communication with payroll customers and recommends that:

1. Customers of the payroll service continue to be promptly notified of any problems occurring and the resolutions.
2. Stakeholders affected by a Cabinet decision should, where appropriate, be consulted and consultation feedback supplied to Cabinet Members before the decision is made.
3. Cabinet decisions directly affecting stakeholders should be shared with them all (a) at the earliest opportunity and (b) at the same time as each other.