Rutland County Council, Over Pays Staff, Thousands of Pounds,
Special Council
Date: 13 May 2013
Time: to be commenced on the rising of the meeting of Annual Council
Venue: Council Chamber, Catmose, Oakham
REPORT NO: 115/2013
COUNCIL
23rd April 2013
REVIEW OF PAYROLL ARRANGEMENTS
Report of the Chief Executive
1. PURPOSE OF THE REPORT
1.1 To brief Members on the outcome of a review undertaken by the Payroll
and Human Resources sections.
2. RECOMMENDATIONS
2.1 That the Council approves:
- The proposal to consult with potentially affected staff as to the
recovery of overpayments;
- That decision making in respect of recovery as well as any resultant
contractual changes is delegated to the Chief Executive Officer and
Portfolio Holder for Resources; and
- That the Strategic Director for Resources reports to the Audit and
Risk Committee on how internal control issues have been resolved.
3. BACKGROUND
3.1 In late 2012 a payroll officer queried a number of payroll payments. The
queries were investigated and a number of errors were identified in the
information held within the Agresso Human Resources/Payroll system.
The queries related to whether correct rates of overtime were being paid
and whether some employees were entitled to certain enhancements,
both of which issues impact on employees’ monthly salaries and on-going
budgets. The investigation into these queries highlighted that errors had
been made. It was agreed by the Strategic Director for Resources that a
full ‘audit’ of employees’ pay and contract records would be undertaken.
3.2 As part of the ‘audit’, HR employees verified whether the underlying
records in Agresso (salary rates, overtime rates, enhancements etc)
reconciled with contractual information held on file. Where this was not the
case, the Payroll team calculated whether there had been any under or
overpayments. The ‘audit’ did not only look at the 2012/13 financial year
but went back as far as 2009, when Agresso was first implemented, and
covered all current employees. 3.3 The outcome of the audit is summarised in the table below.
Pay
budget
Headcount Unders Overs Net
2009/10 £12.9m 477 -£4,732.80 £14,584.37 £9,851.57
2010/11 £13.6m 469 -£5,606.67 £18,219.54 £12,612.87
2011/12 £11.4m 431 -£9,520.13 £22,738.63 £13,218.50
2012/13 £11.5m 405 -£12,017.71 £27,728.53 £15,710.82
Totals -£31,877.31 £83,271.07 £51,393.76
3.4 Members will note that the pay errors go back a number of years,
however the number of employees affected is low, overpayments affect
13% of the staffing headcount level for 2012/13 and the total overpayment
value represents 0.72% of the staffing budget for that same year. The
matter has been discussed with KPMG, the external auditors, who have
agreed that the amounts involved are not material in the context of the
overall pay budget and no prior year adjustments are required to the
statement of accounts.
3.5 The underpayments affect 58 staff and mainly relate to missed
increments, unpaid holiday pay, and overtime paid at flat rate instead of
an enhanced rate or similar. Rectifying the underpayments for 2013/14
onwards will cost approximately £9,000 per year.
3.6 The overpayments affect mainly employees within the People directorate
and have arisen for the following reasons:
Issue : period 2009/10 – 2012/13 Employees Value
Payments for Sunday enhancements have been
made at double time – this rate, as specified in
contracts and NJC Green Book, (national Terms
and Conditions) should reduce to time and a half
when an employee reaches scale point (scp) 12
within Grade 2 (scp 11-13)
16 £34,138
Payment of overtime for employees over scale
point 28 (scp 29 is lowest pay point on Grade
S01) – our contract and NJC Green Book state
there is no entitlement to overtime payment and
that Time off in Lieu (T.O.I.L) is the only
acceptable method of restitution.
15 £13,106
Casual contracts state no enhancements are
payable for weekend working, but enhanced
rates have been paid. Also, there are some
employees on Grade S02 – therefore should not
be entitled to overtime or enhancements.
11 £26,734
A number of miscellaneous overpayments
relating to one off errors
9 £9,293 3.7 The overpayments for a single year for an individual range from £9.57 to
£3091.90, and the average overpayment amount is £400 per year per
employee overpaid.
4. PAY CORRECTIONS AND RECOVERY OF OVERPAYMENTS
4.1 The under and overpayment of employees is clearly regrettable. It is
generally accepted that the underpayments are due to errors or omissions
and need to be corrected – they reflect payments that an employee is
entitled to receive. The intention is to inform employees of the errors and
make these payments in the May pay run.
4.2 The recovery of overpayments is not a straightforward issue. The context
and circumstances relating to the overpayments made are set out below:
Some of the overpayments, relating to employees above scale point
28, have arisen in circumstances where they have been approved by
management e.g. submission of overtime claims; whilst these staff are
entitled to T.O.I.L, they are not entitled to paid overtime. There is a
general perception from managers that the payments (as claimed)
were permissible.
Some employees have been paid an enhanced rate for Sunday
working when they moved from scale point 11 to scale point 12 and
13. Employees, who had been used to claiming double time on
Sundays, continued to do so after the increment was applied. It would
appear that both employees and management authorising claims
believed this to be the correct practice when contractually this was
incorrect. This misconception is understandable considering that
employees moving to scale point 12 would in fact be financially worse
off (as the financial difference between scp 11 and 12 would not
compensate for loss of double time payments based on the existing
working patterns of the staff affected).
Casual employees have received enhanced payments for weekend
working. All claims for payments were approved by management who
believed that this was correct practice.
4.3 In summary, there is no suggestion of fraud but there is clearly a
significant misunderstanding on the part of employees and management
of the contractual position such that overpayments have continued as
custom and practice without any challenge.
4.4 The Council will take all necessary steps to recover the overpaid amounts
wherever this is possible, which will include discussions with the relevant
trades unions. It should be recognised that there is a risk to full recovery.
The legal position is covered in the EXEMPT Appendix to this report. 5. PAYROLL SYSTEM INTERNAL CONTROLS
5.1 The pay audit has highlighted some weaknesses in payroll operations and
the way in which Agresso operates.
5.2 An internal audit of Payroll and Employee Benefits in 2012 failed to
identify any of the specific anomalies which have subsequently come to
light as a result of this recent work. However, it did identify that controls in
this area were weak, and actions to address these particular issues have
already been taken. Once the pattern of errors became apparent in late
2012 a full internal check of current staff seemed the only appropriate
approach as no errors of the type being encountered had been identified
through the formal audit process.
5.3 Some changes have already been made to fix the problems. The Interim
Head of Finance is reviewing the design and operation of systems to
ensure that further errors will not occur. Whilst this review continues, the
Strategic Director for Resources is investigating the potential for
outsourcing the payroll function.
5.4 Once this initial review is completed, then Internal Audit will undertake an
independent review and report their findings to the Audit and Risk
Committee.
6. RESOLVING TERMS AND CONDITIONS ISSUES
6.1 The pay audit has highlighted differences between the contractual
position of some employees and custom and practice as applied by
management.
6.2 The Council cannot continue to simply apply custom and practice as this
may disadvantage those employees who are operating under contractual
conditions. Nevertheless, the Council has an opportunity to consider
whether it is appropriate to revert back to existing terms and conditions or
to amend contracts to reflect the current variations resulting from custom
and practice.
6.3 For example, for employees who have been paid ‘double time’ for Sunday
working when they moved from scale point 11 to scale point 12 and 13, is
it appropriate that the enhancement is reduced to ‘time and a half’ which
would effectively (assuming they worked at least 78hrs on Sundays)
reduce their income?
6.4 It is proposed that officers investigate each case and assess:
whether changing contractual practice is the preferred option;
the financial impact of any changes; and
the operational impact of any proposals.
6.5 Irrespective of the preferred option, the Council will seek agreement with
the Unions as to any proposals formulated.
7. RISK MANAGEMENT
RISK IMPACT COMMENTS
Time High Early consideration and decision is required so that
action to address the issues can be taken
Viability Low The possible courses of action are achievable,
subject to the circumstances of each case.
Finance Medium Any proposals will be delivered within current
budgets.
Profile High Overpayments to employees at a time when budgets
elsewhere are constrained may generate adverse
public opinion.
Equality and
Diversity
Low EIA screening produced a low result; therefore a full
EIA was not required.
Background Papers Report Author
Helen Briggs
Chief Executive
Tel No: (01572) 722577
e-mail: enquiries@rutland.gov.uk
A Large Print or Braille Version of this Report is
available upon request – Contact 01572 722577.
