HR/Payroll System - GLA Strategic Options

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HR/Payroll System - GLA

Strategic Options

Arnab Banerjee 9/2/2010

Review the partially drafted HR/Payroll systems requirement document and advise on the suitability of Tier 2 vendors to meet the requirements in the document. Advise on the feasibility of functional delegation to LFEPA(The London Fire and Emergency Planning Authority) and LDA(London

Development Agency)

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Executive Summary:

Greater London Authority (GLA) is a strategic authority with a London wide role to design a better future for the capital. The Mayor and the London Assembly are elected and the staff of the GLA are a permanent body that provides continuity in the ongoing development and delivery of strategies for London.

Together GLA has about 500 employees (staff and assembly members). Their current HR & Payroll system - ResourceLink, from Northgate Arinso, expires in September 2011. A strategic decision on the Payroll system needs to be taken by September 2010.

Scope of Work:

GLA commissioned Deloitte for advice on the strategic options for the HR/Payroll contract. The terms of reference of the engagement are:

 Review and comment on the partially drafted HR/Payroll systems requirement document  Advise on the suitability of Tier 2 vendors to meet the requirements in the document  Advise on the feasibility of functional delegation to LFEPA(The London Fire and Emergency

Planning Authority) and LDA(London Development Agency)

Method of Execution

Arnab Banerjee, a manager with Deloitte’s Enterprise Application practice, conducted a series of discussions with various stakeholders in GLA, LFEPA and LDA from 25th August to 1st September to understand existing HR & Payroll systems and services to advice on available strategic options. Following is the list of people whose views were taken to prepare this report:

 David Gallie, Assistant Director of Finance, GLA

 Frances Nguene, Chief Accountant, Financial Services, GLA  Juliet Carter, Head of HR, GLA

 Patrick Alleyne, HR Operations, GLA  Anna Tapp, HR, LFEPA

 Michael Vallis, Exchequer Services Manager, LFEPA  Frederico Maia, Head of HR Operations, LDA

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Findings & Recommendation:

Review of the HR system statement of requirement

The HR requirement document is a comprehensive list of requirements.

Given the larger environment of cost pressures and efficiencies, an exercise to prioritise the requirements is needed. The prioritising can be based on the following parameters:

 Mandatory – any current functionality supported by today’s systems the loss of

which will severely impair operation and strategic insight

 Highly desirable – any functionality providing business critical improvements over

today’s systems.

 Desirable – everything else.

Based on discussion and a demonstration of the current HR system, the requirement may be prioritised as follows:

Functionality Mandatory Highly Desirable Desirable

Process Payroll Employee Records Organisation and Management Structure Establishment structure including linking personnel to Posts Absence Management Employee Self Service (Payslips, P60, Bank and address information) Training Database Learning Management System Recruitment Performance Management

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The HR system statement of requirement does not specify the payroll requirement in the same degree of detail.

A sample Payroll systems requirement document has been provided to Frances Nguene to specify the payroll requirements in greater detail.

Some GLA specific requirements have been already identified. These needs to be included in the statement of systems requirement:

Payroll Set up Payroll Processing Reporting Payroll Service  Multiple Pay groups  Multiple Payroll Runs  Processing of payroll changes – Overtime, changes to bank details, etc.,  Payment and Payslip generation in multiple currency  Account for untaken leave on 31st March

 Reports for NFI purposes  LPFA reports  YTD and monthly reports on gross pay, deductions, pay elements and activity data at employee, cost centre levels  Dealing with HMRC queries  Responding to ad hoc requests to calculate net pay  Provide data for Civil service pension purposes

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Suitability of Tier 2 vendors to meet the requirements in the document

SAP, Oracle and Peoplesoft will be able to meet all the requirements.

However, given their cost and time required for implementation, it will be difficult to develop a business case for any of these tier 1 vendors given that GLA’s employee base is only around 500 + with a growth projection of circa 800 in the next few years.

A number of Tier 2 vendors have the ability to meet the systems requirements of GLA. Below is a list of some of the market offerings in HR/Payroll systems:

Systems Core HR Recruitment Learning Management Performance Management

Absence Payroll Self Service Reporting Accero (LFEPA) √ √ √ √ √ √ √ √ ResourceLink (GLA) √ √ √ √ √ √ √ √ iTrent (LDA) √ √ √ √ √ √ √ √ Chris21 √ √ √ √ √ √ √ √ Carval √ √ √ √ √ √ √ √ Cascade √ √ √ × √ √ √ √ E-Payfact √ √ √ √ × √ × √

In the event of external tendering it is recommended that GLA looks at Tier 2 vendors also as most will have functionality to meet its requirements.

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Feasibility of functional delegation to LFEPA (The London Fire and

Emergency Planning Authority) and LDA (London Development Agency)

LFEPA (The London Fire and Emergency Planning Authority)

LFEPA uses Accero Cyborg HR & Payroll system to process the payroll of its 7000 employees

System Core HR Recruitment Learning Management Performance Management

Absence Payroll Self Service Reporting Accero Cyborg (LFEPA) √ √ √ √ √ √ √ √

Advantages of delegating GLA’s HR & Payroll function to LFEPA:

 Evolved payroll functionality already processing payroll for more than LFEPA 7000

employees.

 Standard Functionality robust enough to accommodate most of GLA’s payroll and core HR requirements with some degree of customisation

 Most of the payroll reports required by GLA already pre defined for LFEPA use. Also reports readily available to targeted end users to execute themselves.

 Self service already available for employees to view payslips and P60s. Employees can amend bank details and address through self service

 Will be possible for GLA to use LFEPA’s bespoke solutions for Absences/Attendance management. Using Accero Cyborg’s Absences/Attendance management functionality will also be an option for GLA.

 Use of LFEPA’s existing infrastructure(hardware, network, software upgrades/patches and employees for payroll services representing a shared service mode of delivery

 Minimal involvement of GLA’s resources in initial migration to LFEPA system and maintenance and service provision thereafter

Disadvantages of delegating GLA’s HR & Payroll function to LFEPA:

 Greater level of control on the level of service provided by a contracted third party than on an internal organisation. This can be mitigated by good governance, existence of a service level agreement and monitoring.

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 ResouceLink( GLA’s current system and iTrent (LDA’s current s system provide better user interface/experience.

 Possibility that any GLA specific requirements will impact existing set up for LFEPA and may not be accommodated

 Control of the system will be with LFEPA IT and not with GLA HR super users as it is now  Accero Cyborg is not as user friendly and easy to configure/customise as ResourceLink (GLA’s

present system) or iTrent(LDA’s system)

 Fragmented IT landscape. Accero Cyborg is the leading core HR and payroll system but a lot of other systems are in place for other applications – Attendance, Absence, learning etc  Turnaround time for new reports, screen enhancement/modifications will be greater

Indicative Cost estimate

An initial indicative estimate to set up system to enable online viewing of payslips and core reporting such as General Ledger interface and basic pay details would be in the region of £20000. This could rise depending on any changes needed to the LFEPA core system based on special GLA

requirements.

To provide a payroll service for 500 staff would be in region of £60000 annually.

This indicative cost estimate is based on providing payroll service only at this stage and do not include HR functions like recruitment and training. The indicative start up costs may also vary if a GLA specific datamart needs to be established so that GLA users can develop their own reports. There may also be some additional costs to undertake security testing, again depending on requirements.

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LDA (London Development Agency)

LDA uses iTrent – a web based integrated HR and Payroll system from MidlandHR to process payroll for about 500 employees

Systems Core HR Recruitment Learning Management Performance Management

Absence Payroll Self Service

Reporting

iTrent (LDA) √ √ √ √ √ √ √ √

Advantages of delegating GLA’s HR & Payroll function to LDA:

 Evolved HR and Payroll functionality already in use by LDA which will cater to most of GLA’s requirements both in HR and payroll with minimal customisation

 Fully web based, user friendly and easy to configure and customise

 Self service applications already in use – Payslips, P60s, employees changing address and bank details

 Workflow enabled manager and employee self service functionality in use for Absence management

 Similar way of working with HR super users making most of the system changes

Disadvantages of delegating GLA’s HR & Payroll function to LDA:

 LDA as an organisation has a limited life and will be merging with GLA from 2012. Its contractual validity with MidlandHR is not clear. It is not clear if GLA can take over ownership of the present contract with LDA.

 Due to the limited life of LDA and possibility of loss of employees skilled in the operation of the existing HR and payroll services, the transition to GLA will be pose problems.

 GLA users will have to take ownership of iTrent and will have to develop the same level of expertise as LDA HR users have now. This will take time and also impact the level of service in the short to medium term. GLA will have to carry the hardware/software costs and cost of employees needed t o support the system.

 It may be necessary to bring on board LDA employees specifically for this purpose contributing to greater overhead costs.

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 Payroll service is provided by LDA employees and functional delegation will for GLA will mean additional fixed cost of 1 -2 FTE(s) to provide the same level of service.

Indicative Cost estimate*

Indicative initial cost to set up system is estimated to be between £35000 and £ 40000. To provide a payroll service for 500 staff would be in region of £50000 and £ 60000 annually. This estimate will vary depending on the nature and level of services.

*The figures above are based on pro-rated implementation (medium complexity) and maintenance costs of a fully managed payroll service for other organisations.

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Recommendation:

Given the similar functionality on offer and anticipated cost savings, the option of exploring the possibility of migrating to a common HR/Payroll systems platform with LDA or functional delegation to LFEPA should be considered.

A brief comparison between the two options is provided below -

Organisation(HR/Payroll system and service)

Indicative initial set up cost(£) Indicative Annual Maintenance Cost(£) Similarity/Degree of fit with Payroll functionality

Similarity/Degree of fit with core HR functionality

Transitioning Arrangement

User Experience

LFEPA (Accero-Cyborg) 20000 60000 High Medium Clear cut (Shared

service type operations with its associated cost benefits)

+

LDA (iTrent from MidlandHR)

35000 - 40000

50000 - 60000

High High Complex;

ultimately leading to ownership of system with associated fixed costs (LDA/GLA employees to support the system, provide payroll services hardware/software costs) ++

A very detailed mapping of GLA’s functionality and data elements with available/implemented functionality and data elements in LDA/LFEPA’s systems needs to be carried out.

Governance and ways of working in a common platform/shared service kind of environment needs to be agreed.

SLAs need to be agreed between GLA and the LDA/LFEPA.

Comparative Cost of Ownership

A comparison of the indicative cost of ownership** for the functional delegation option with owning a Tier 2 HR/Payroll software is provided below:

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Functional Delegation to LFEPA Functional Delegation to LDA GLA owned system *** Indicative cost of implementation/initial set up(£) to GLA 20000 35000 - 40000 Circa 75000

Indicative cost of Annual Maintenance(£) to GLA

60000 50000 - 60000 80000 - 120000

Hardware Cost for GLA Not Applicable Yes, transfer of LDA’s existing technical infrastructure Yes Software Cost(Upgrades/Legal patches) for GLA

Not Applicable Yes Yes

Full Time Equivalent (FTE) cost of staff to implement transition/implementation of new system for GLA

1 for one to two months

1 for three to six months

Full Time Equivalent (FTE) cost of staff to maintain system and provide payroll services for GLA

.25(to liaison with LFEPA)

1 -2 1-2

**The indicative cost comparison is based on Deloitte’s experience with similar products and organisations and on interviews with LFEPA and LDA staff and will vary depending on the degree of customising that will be agreed to fit GLA requirements. The following assumptions have been made:

 Use of core HR and Payroll only

 10 -20 concurrent user licences & Self service for 500 Users  Fully managed payroll services

*** The figures are indicative and will vary depending on the software selected. The indicative figures are provided based on our experience with best of breed products for organisation of a similar nature and size for HR & Payroll.

HR/Payroll System - GLA Strategic Options