The Government says it is sticking with the trouble-plagued system Novopay, which has incorrectly paid thousands of school staff since it was introduced.
However, it has not given it a full vote of confidence and its long-term future remains under review.
The system from Australian company Talent2 has been beset with problems since its introduction in August last year. The Government is spending millions on fixing problems and recompensing schools.
The previous software provider, Datacom, had been preparing an alternative system in case the Government decided to pull the plug.
The minister responsible for Novopay, Steven Joyce, said on Tuesday that Datacom needed a decision on how to proceed and the Government decided that the status quo was more practical for now.
Mr Joyce said making a change at this point would increase the workload of school administrators and Novopay is steadily improving. However, Talent2 and the system is still under review.
"Given a lot of thought, what we've done is seen a very significant improvement on pay period to pay period delivery and some progress in clearing bugs. So, on balance, it wouldn't be sensible to make a change."
Mr Joyce said the Government will stick with Novopay at least until June - but it is not an endorsement of the system.
Datacom would still be on hand to prepare another back-up if it is needed in a few months, he said.
Novopay still has to meet several milestones, including clearing a backlog of 25,000 unresolved mistakes. There is also a ministerial inquiry into the Novopay debacle, which could result in changes to the school payroll.
Problems remain, says principal
Principals say they have seen improvements in Novopay and hope the Government has made the right decision.
However Waitara High School principal Jenny Gellen doesn't agree, and says it will cost her school financially.
"We'll continue to have to pay the finance clerk extra money for the extra hours she has to do dealing with Novopay. My staff will continue to worry every time there's a pay round that their pay's not going to be correct.
"So the worry and stuff is still there - but there's not a lot we can do about it, we've just got to work with it."
Ms Gellen said the school is seeing fewer payroll mistakes, but the system is still not easy to work with.
Some overpayments to be written off
Steven Joyce also announced on Tuesday that the Government would not seek to recoup small overpayments that school staff received in error.
These include one pay when thousands of staff were overpaid just over $6, and any individual overpayment less than $100 to a maximum of $300 in one year.
Between $200,000 and $300,000 would be written off.