Mr Joyce said "pretty good progress" had been made in recent months to fix the system but Talent2 had not been prepared to provide extra resources necessary for further development of the system such as simplification of the software for schools. It had become clear "the best outcome would be a change in the provider relationship".
Chris Hipkins, Labour's education spokesman, said the Government was trying to divert attention from Novopay before the election campaign because "teachers will be confronting National MPs and candidates with the clear message that Novopay hasn't been fixed".
But Mr Joyce said it was announced yesterday because it had taken time to reach an agreement.
"I would have been quite happy for it to happen a couple of months ago but it's taken quite a while to negotiate the position."
Prime Minister John Key said the education sector "will take quite a lot of confidence that effectively the Government is taking over the program and the project. They'll know it will be properly resourced and properly looked after."
Principals' Federation president Phil Harding said it still wanted "significant and permanent adjustments to operational funding" to compensate for increased costs associated with the payroll system.
The New Zealand Educational Institute said its main concern was that it had taken so long to get to this point, but the Post Primary Teachers' Association welcomed the move.
Principal eager to forget pay nightmare
The principal of a small Masterton school which has spent tens of thousands on salaries after Novopay stuff-ups is holding her breath.
Gail Marshall, who has been the head at Solway School for 13 years, said the Novopay payroll debacle had been "a nightmare".
But after Cabinet minister Steven Joyce's announcement yesterday that a Government-run company would take over the system, she was holding her breath and keeping her fingers crossed.
Since the implementation of the Novopay system in 2012, the school had spent more than $20,000 paying teachers and support staff salaries out of its own funds - money that should have gone towards other things. In one case, a solo mother and part-time teacher at the school was not paid for five months.
"Some of our staff have only just been able to start paying us back. It affected auditing and it affected our bank staffing quite dramatically," Mrs Marshall said.
She and the school's office manager, Vivian Nicol, had spent "hours and hours" together working through problems with the system.
"I would be here some nights till nine o'clock, having started at eight in the morning."
But support from parents, the school's board of trustees and the community had enabled them to get through the most trying period and they now felt as though they had come out the other side.
Mrs Nicol said she was apprehensive about the possibility of further changes to something she was just starting to get her head around.
nzherald.co.nz
For the Herald's full coverage of the Novopay debacle, go to: tinyurl.com/nznovopay
