Authored by: Ron Warren

Published: 2009/05/22 –Law24.com

The days before computers

Prior to 1959, the “mechanical” processing of payrolls was done on accounting machines, and for large payrolls on punched card equipment.

For punched card machines, all data was held on punched cards – approximately 19 centimetres wide and 8 centimetres long. These punched cards held up to 80 columns of data each. Each column of data could contain holes punched in any of 12 positions (to allow for 12 pence in a shilling). Numeric values could be represented by one hole in a column, and alphabetic information by two holes – a combination of a hole in one of the 0, 10 or 11 positions plus a hole in one of positions 1 through 9. This gave 27 possible alphabetic characters, which was fortunate as there are 26 characters in the alphabet!

These cards would be read by a machine called a tabulator, which could perform addition and subtraction functions, print one alphabetic column and about 5 or 6 numeric columns, and punch new cards with results to be carried forward (such as accumulated tax totals).

Obviously, in each pay period new data cards would need to be punched for any new variable data, and these cards would have to collated into the pack of cards containing employees’ names and permanent data (such as rate of pay), as well as all the cards containing brought forward information from the last pay run. This was achieved by first sorting the cards that were in random sequence (the new data cards) into employee number sequence, which was done one column at a time by a machine called a sorter. The sorted cards would then be collated by employee number into the pack of cards containing names and permanent data, as well as the pack of cards containing brought forward totals from the previous pay run. This was done on a machine called a collator.

The collated pack of cards would then be run through the tabulator to produce the next pay period’s payroll.

Immediately prior to the introduction of computers, a machine was produced to read cards and perform multiplication, division, addition and subtraction, and punch a new set of cards containing the results. This was hailed as a great advance, eliminating the need to do manual calculations and manually punch the results into cards.

The first computers

Shortly thereafter, in about 1958/59, the first computers were introduced into South Africa, by IBM and Hollerith (who later changed their name to ICT and then ICL). I worked on the early Hollerith computer known as the HEC (Hollerith Electronic Computer) 1201 and 1202. It could read cards, perform programmed calculations, print the results on a tabulator and punch the data to be carried forward. The reading and punching of cards was done by the tabulator and punch described earlier, which were connected by cables to the computer itself.

The HEC computers on which I worked were approximately 6 feet high, with a frontage of about 6 feet and a width of about 4 feet (we had not decimalised in those days). They consisted of a rotating drum which was the equivalent of current internal memory, and hundreds of valves about the size of a thin light bulb. These valves were in later computers replaced by transistors.

The drum could hold 2 000 (1201 model) or 4 000 (1202 model) bits (not bytes) of data, depending on the model. The data could consist of both programs and normal data. Obviously, the data for all employees could not possibly be held in such a limited space, and accordingly only working data per employee was held on the drum. Permanent data was still held on punched cards.

Programs were written in binary on a large programming sheet (about the size of 4 foolscap sheets), and were allocated successive addresses on the drum. In allocating this address, one had to calculate the size of the instruction itself, and the time that would be taken by the preceding instruction to complete its operation. Any miscalculation would result in either a wasted drum revolution, or wasting time while the drum reached the place where the next instruction was stored, thus slowing down calculations. Imagine the complications when one had to make program changes!

In spite of all these problems, we regarded these huge computers as miraculous, giving the ability to evaluate a set of conditions and then do calculations dependent on the result of that evaluation. Incidentally, there was no operating system supplied with the computer – one had to program everything, including a “card read” function, a “card punch” function and a “print” function.

Programs were held on punched cards, which were read into the computer immediately before a run involving that program was started. The whole program had to fit on the drum, leaving sufficient space to enable working data to also be held. Actual calculations were performed by reading the data and the program step into four (as far as I can remember) electronic registers of about 40 bits (not bytes) each.

Imagine the disaster that occurred if one dropped a pack of program cards and had to get the cards back into sequence before the next run!

The first payroll programs

The first commercial job to be computerised was the payroll, because of its regularity and the large number of calculations required to be performed.

There was obviously no direct access to any data other than that held while a calculation was being performed, so all other data had to be held on punched cards which would be read serially. We were used to serial processing from the way we used to process with the old tabulators, so did not give it a thought.

The earliest computerised payrolls run on HEC computers that I am aware of were programmed and run on their own HEC computers by:

• Cape Provincial Administration

• Durban Corporation

• Consolidated Textile Mills

These programs were written and brought into use during 1958/59.

A computer bureau was stated by Des Gers and Derrick Rock in Johannesburg, using a HEC 1202 computer. They created a program to pay the large weekly payroll for Stewarts and Lloyds factory in Vereeniging in 1962/63. A bureau was opened by me in Durban in 1961, when I left Consolidated Textile Mills to start the bureau. Most of the regular work performed on the bureau was for payrolls.

Second generation computers

In the mid-1960’s, the second generation of computers came into being, where transistors were substituted for valves. This enabled computers to become much more compact, although still large by current standards. The Durban and Johannesburg computer bureaus merged and replaced their HEC computers with the ICL 1500 computer, which had a random access memory instead of a drum.

Although this was of a much larger capacity then the HEC drums, it was still very small compared to today’s computers.

The 1500 also used magnetic tapes instead of punched cards to store data, although it also accepted cards as an input medium. However, by its very nature magnetic tape still meant that data had to be read serially, not randomly, so it merely served to make the storage and access of serial data much quicker.

More and more payrolls were being run on both bureaus, with each payroll having its own specially written program. While chunks of program were copied from other payroll programs, it was expensive and time consuming to maintain so many similar programs.

It was this that caused the germination of an idea that came to me – to try and write a payroll program that could be used for all the bureau clients, with a “header” record on each magnetic tape recording the variables that were peculiar to the customer. We implemented this successfully, and this was the crude beginning of a standardised payroll program which could be used by many employers.

At about this time, disk storage started being introduced. The first disk device I saw looked and operated like a juke box, with disks being selected and dropped to the working area. NCR introduced a variation involving flexible storage media hanging from rods, with an ingenious mechanism which selected the required item, wrapped it around the read/write mechanism, processed it and then whipped it back into its storage place.

Disk storage got more sophisticated, leading to large removable disks which could be manually placed into the read/write machine. The concept of “random access” started to be understood and its enormous advantages realised. This was to change the way computers operated and the way programs were designed.

Standardised payroll systems

In 1967 Des Gers and I resigned from the ICL bureau and went into business on our own. We had the concept of designing a truly “parameterised” payroll system, which could be run not only by computer bureaus but also by end users on their own computers.

We formed a company, Q Packaged Programs Ltd, to finance the development, and started the design and programming of what I believe was the world’s first parameterised commercial computer system. All the variables that we could think of from our extensive payroll experience were entered by users on forms, which were then transferred to punched cards and stored on disk in such a way that that they could be randomly accessed whenever required, thus causing the program calculations to be customised to perform their calculations. This was made possible because the “parameters” could be stored in a random access file on a disk, making them instantly available to the program as and when required. This was a real South African world first!

Qpac, as the payroll was known, became widely used in South Africa, not just because it was a good product that saved time and money, but because it was the only such product available in the early 1970’s. PC’s had not yet been invented, and it was therefore a product that ran on mainframe computers.

Soon after its release in South Africa, a cash handling institution (Fidelity Guards) realised that Qpac would enable them to offer their customers a service by opening a computer bureau using Qpac to process payrolls. They would not need any programmers, but just persons who were knowledgeable about payrolls who could be trained to complete the Qpac parameter forms. This turned out to be hugely successful, and started a new industry in South Africa.

Standard Bank and Barclays Bank (now First National Bank) were early adopters of Qpac, not just to pay their own staff but also to offer their customers an easy to use payroll service, which ran on the banks’ main frame computers.

We took the product overseas, first to the UK, then the USA and Canada. The only changes necessary were for statutory purposes (tax and social security), and the product was very successful in those countries, in spite of fierce local competition.

Other payrolls copied the idea of parameters, and it became the norm by the end of the 1970s.

Personal computers

The late 1970’s saw the start of personal computers that could be used by one person. Bright computer technicians started building one-man computers in their proverbial garages. In the early 1980’s PCs became commercially available, and transformed from being the playthings of geeks to being used commercially.

Staff from the first mainframe computer bureau decided to leave that environment and designed the first commercially available PC payroll system in South Africa, which became known as Accsys. It gained immediate acceptance, and was soon used by hundreds of small employers. Competitors soon entered the market, and there were many PC payroll and other commercial systems on the market.

PCs eventually took over from mainframes, as they became more powerful and competitive. By the end of the 20th century, mainframe PC systems were hardly used at all. Qpac itself was converted to run on PCs as well as mainframes, and in due course the mainframe system was dropped.

The internet

In the mid 1990s the internet (which was invented in 1989) started to become used commercially. By the end of the century, it was in general use and had transformed the way people communicated with each other, both personally and in business.

Microsoft and other software houses like Oracle introduced something that had been unheard of previously – databases. These were designed to randomly hold unrelated items of data for an organisation, and make it easy for that data to be shared by diverse computer systems or programs.

This revolutionised the way data was held, and made it comparatively easy to share data between systems. For example, a payroll system could easily share data with a human resource system, using transparent interface programs. This made it possible to allow smaller software developers to design specialised systems to perform one aspect of a business’s operations superbly, and to interface with other systems performing other functions. Instead of having one monster system that did everything moderately well, it became feasible to have a number of “best of breed” systems performing their own functions superbly, and joining with other diverse systems which performed other tasks equally well.

It also enabled data to be shared over the internet. In the payroll arena, organisations with branches in various far spread areas are able to enter their own data into the central system securely, and to make enquiries easily. It also enabled programs used by many users to receive updates from the originator over the internet immediately, without having to rely on the post or couriers.

Databases, because they allowed masses of data to be held and accessed easily, made it possible for payroll systems to hold payroll data for ever, without the necessity of having to backup old data in case it was required one day. It also meant that systems could be designed to be date sensitive, and for back dated data to be entered (for example, back dated pay awards) and processed correctly be reference to the original data. This has revolutionised the way payrolls are run, although there are still many payroll systems which have not taken advantage of this comparatively new development.

Milestones and the future

To summarise all that has been set out above, the major milestones in the development of payrolls over the last 50 years are:

•        Late 1958/9 – first payrolls to run on the early computers, using punched cards.

•        Early 1960s – the establishment of computer bureaus to process payrolls on a large scale.

•        Mid 1960s – the introduction of second generation computers, using transistors, which enabled much larger and faster memories to be used.

•        Late 1960s – the introduction of disks, enabling random access to data.

•        1971 – the introduction of Qpac, the first ever parameterised payroll system.

•        Mid 1970s – the introduction of a specialised computer bureau using Qpac and dedicated to the running of payrolls.

•        Late 1970’s – adoption of Qpac by major banks for running their own and their customers’ payrolls.

•        Early 1980’s – the introduction of the personal computer and their use of parameterised payroll systems.

•        1989 – the invention of the internet.

•        Early and mid 1990s – the invention of databases and the interfacing of payroll and human resource programs.

•        Mid to late 1990s – the evolution of the internet for commercial purposes, leading to its use for new generation payroll systems.

•        Early 2000s – web based payroll systems.

And what can we expect of the next 10 years?

South Africa is about to come into line with the rest of the first world in receiving fast, reliable bandwidth, which will make it possible for computer hosting of payrolls. That is, a type of service bureau will come about which will host payroll programs and databases, allowing employers to access the host computer easily and fast. For all practical purposes, the employer will use the host computer as though it was its own computer, but would be relieved of the necessity to keep the programs and system up to date, and to keep backups of their database.

Computer hardware to enable an employer to connect to such a hosting service will become faster and cheaper, making it economic for small employers to use such a service, not just for their payrolls, but for accounting as well.

Traditional payroll computer bureaus will also flourish, for those employers who are prepared to pay a bureau to perform all their payroll related functions, including the payment of all third parties and taxes. Because of the ease of access through first world bandwidths, such a service could be operated rather like call centres, processing payrolls from anywhere in the world. Of course, the payroll system being used will have to be able to calculate the tax and social security deductions for every country they deal with!