The move to place beleaguered payroll system Novopay under Government control will make it more transparent and accountable, school heads say.
The controversial system, which has been marked by a flood of errors, including $22.5 million in overpayments since it went live in August 2012, has now cost the taxpayer $110 million - $45 million more than budgeted.
It was announced on Wednesday that Talent2 had withdrawn from the management of the system, and a Government-owned company would replace it.
Philip Harding, president of the New Zealand Principals' Federation, said it welcomed the move, because the causes of Novopay's shortcomings would now be made public.
"We have battled to get any clear understanding of the defects behind the Novopay failures in large part because of the commercial sensitivity surrounding the Talent2 relationship," he said.
"The announcement does not cure the Novopay shambles that the sector has been battling for the last three years.
The same challenges of random errors, frustratingly slow problem resolution, inaccurate personnel data, and significantly increased workload will continue.
"Success will be determined by the way the new entity is managed, and more importantly, resourced to deal to these priorities."
He called on the Government to make a "significant and permanent adjustment to operational funding" to compensate for the increase in costs being borne by schools through the inadequacies of the Novopay system.