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Subject: Payroll Report Number: 14 Report to: Business Management and Appointments Committee Date: 11th February 2004 Report of: Executive Director of Finance and Performance 1. Recommendation 1.1 That the Business Management and Appointments Committee note the report. 2. Background Contract, Tendering and Contractor Performance 2.1 During the Autumn of 2001 a full OJEC tendering exercise was undertaken to procure a payroll service provider to commence services in April 2002 for an initial contract period of three years. Northgate Information Systems were subsequently selected as the preferred supplier and were appointed on 28 January 2002. 2.2 Northgate Information Systems are now well into the second year of the contract and up to December 2003 their performance has been considered to be very good. Pay Dates 2.3 The Northgate/GLA contract states that the ‘main’ pay date is scheduled for the 28th of the month, or the preceding working day and for December the pay date is brought forward to the 20th of the month, or the preceding working day. This schedule of paying staff and members has been GLA practice since the GLA was formed. From an employee perspective, the GLA’s ‘employment contract’ states a pay date of 28th of the month so ‘paying early’ in December is an employee benefit. 2.4 The current procedure for approving pay dates between the GLA and Northgate is that a payments schedule is approved prior to the new financial year that shows, on a month-by-month basis, all information submission deadlines and the pay dates. An early draft of this schedule was forwarded to Northgate that did show a pay date of the 23 December 2003, this error was quickly identified and a revised schedule was emailed to Northgate on the 25 April 2003. Northgate have confirmed that they did receive a correct payment schedule in April 2003. City Hall, The Queen’s Walk, London SE1 2AA Enquiries: 020 7983 4100 minicom: 020 7983 4458 www.london.gov 2.5 3. Each month, the GLA supplies all the information to Northgate by a cut-off date specified in the payment schedule. Northgate then calculates pay and transfers the relevant amounts to individual bank accounts on the agreed date. Issues for Consideration December 2003 Payroll 3.1 In December 2003, whilst the information was provided to Northgate by the relevant date it was discovered on the morning of Friday 19 December 2003 that Northgate had, in error, set up the payroll so that funds would be transferred into bank accounts on 23 December 2003 rather than 19 December 2003. Northgate immediately accepted responsibility for this error. However, payroll data had already been released and was in the BACS system and it was too late to retrieve the data and correct the pay date for the Authority’s payroll. 3.2 Northgate offered to set up CHAPS payments (i.e. same day bank transfers) for everyone on the payroll but could not arrange the payments on Friday 19 December 2003. This meant that, for most staff, payment would still not have be been received until Monday (22 December 2003) or Tuesday (23 December 2003). In addition, the original December pay would have reached their accounts on Tuesday. This would have resulted in staff and Members receiving two months’ salary in December and the Authority having to recoup overpayments. Action Taken to Prevent Hardship 3.3 were Staff were informed of the situation by email late in the morning of 19 December 2003. They also informed that: a) the Authority would meet the cost of any bank charges incurred directly as a result of the payroll error b) if they needed funds over the weekend they should contact Core Finance who would arrange for a same day transfer of funds into their bank account 3.4 In the event, 24 staff requested same day transfers totalling £9,730. All these payments were processed by the banking system deadline. However, two payments totalling £600 failed to reach the named accounts because of incomplete bank details (these accounts required additional reference numbers). These two officers subsequently informed Core Finance that they had not experienced any particular problems prior to 23 December 2003. All staff receiving interim payments were given the option either to repay the amount in full by 9 January 2004 or have the amount deducted from their January pay. One officer repaid the amount by 9 January 2004 and the remaining 21 will have the payments deducted from their January pay. 3.5 To date, two officers have made a claim for bank charges incurred as a result of this payroll error. More claims may however be made as staff receive their January bank statements. Review of Procedures 3.6 Northgate have accepted responsibility for this error and were asked on 22 December 2003 to provide a report on how the error occurred and what action was being taken to prevent any recurrence. Northgate’s response to that request is attached as Appendix A. As indicated in their letter, Northgate have reviewed and amended their procedures to prevent a similar error arising again. 2 3.7 In view of the comments made in Northgate’s letter, we have also reviewed our own procedures. The Pay Release form and BACSTEL report do not state the payment date. Other supporting documents do, however, state the payment date but the discrepancy was not picked up by Core Finance staff. 3.8 The following action has been taken to improve current procedures: Northgate’s pay release form has been amended to include the payment date additional internal checks on supporting payroll reports have been introduced the payment date will be confirmed by telephone each month and noted on file 4. Strategy Implications 4.1 There are no strategy implications arising from this report. 5. Legal Implications 5.1 Under S.67(2) of the GLA Act 1999 the Assembly after consultation with the Mayor are responsible for the recruitment and appointment of staff and under S.70(1) they are responsible for settling terms and conditions of staff including terms as to remuneration. This includes arrangements for paying staff. Strictly a failure to pay staff as agreed under a contract of employment is a breach actionable in the Employment Tribunal but in this case as the pay date had been bought forward and as the Authority has covered all losses no actions will flow. 6. Financial Implications 6.1 Northgate have accepted liability for this error and will cover the costs incurred by the GLA and bank charges incurred by staff directly as a result of this error. There will, therefore, be no net cost to the Authority. 6.2 The cost to the Authority of the 24 CHAPS payments was £144. To date, two claims for bank charges incurred have been received, totaling £129. Background Documents: Contact Officer: Telephone Number: None Myfanwy Barrett, Head of Core Finance 020 7983 4204 3