On the eighth anniversary of the launch of the problem-plagued Phoenix pay system, Canada’s largest federal public service unions have come together to formally demand that the government begin negotiating additional damages for workers impacted by what Public Service Alliance of Canada national president Chris Aylward described as the “Phoenix pay disaster.”  

“Unfortunately, eight years into the pay fiasco, there is nothing to celebrate, no light at the end of the tunnel,” Aylward said, adding that since the launch of the pay system “there hasn’t been a single pay period without issues.”

“Paycheque after paycheque, workers are still facing constant stress and anxiety, wondering if they’ll be paid. That’s why we’re here today,” said Aylward. 

In addition to the billions of dollars the government has spent to fix the ongoing pay problems that have left thousands of public servants either overpaid, underpaid, or not paid at all, $154-million has also been paid to contractors since 2018 for the development of an alternative pay system. 

Aylward spoke alongside Yvon Barrière, the union’s regional executive vice-president for Quebec; Jennifer Carr, president of the Professional Institute of the Public Service of Canada (PIPSC), as well as Nathan Prier, president of the Canadian Association of Professional Employees (CAPE) during a Feb. 27 press conference on the Hill. 

“Enough is enough,” Carr said. “Our members have reached a breaking point, and it’s time for real solutions.” 

“We demand immediate action from this government. We call on Treasury Board to negotiate ongoing damages for workers who have been affected by Phoenix until they receive proper and timely pay, every time,” she added.

The Phoenix pay system administers federal employees’ payroll. The IBM-made system was created under then-prime minister Stephen Harper’s Conservative government. IBM was awarded the contract for the new pay system in June 2011 through Public Services and Procurement Canada’s (PSPC) competitive process.

The system was finally rolled out in 2016 by Prime Minister Justin Trudeau’s (Papineau, Que.) Liberal government, and has been a pain for the public service since its official launch. 

Unions had repeatedly raised concerns that the system was being prematurely rushed when Phoenix was rolled out in the spring of 2016, but the Liberal government went ahead with its launch.

Government records show that there have been 50 amendments to the initial Phoenix contract—valued at $309-million—to fix errors within the system between June 2011 and December 2020, for a total contract value of $545-million.

Carr said the government should also prioritize hiring more compensation advisers to stabilize the current system to tackle the backlog of pay issues. 

CAPE president Prier called the Phoenix system a “fiasco [that’s] been the most expensive administrative blunder in the history of the federal government.”

“We’re demanding that this government commit to providing damages and an expanded claims process for its employees for the Phoenix fiasco until an effective and a permanent solution is in place,” said Prier.

Final recommendation on way forward for HR and pay expected later this year

The federal government has spent more than $150-million since 2018 for the development of a new platform, Dayforce, that may replace the Phoenix pay system. The new platform has been tested as a potential solution for streamlining human resources and payroll operations, and has shown promise in meeting the government’s needs.

“This investment covers expenses from 2018 until the end of March 2024 to explore alternative HR and pay systems. A final recommendation on the way forward for HR and pay is expected later this year,” Michèle LaRose, a PSPC spokesperson, said in a Feb. 21 email to The Hill Times.

Dayforce is an online platform that delivers payroll, human resources services benefits, talent, and workforce management.

The federal government has been grappling with the ongoing challenge of transforming and renewing its human resources and payroll systems for almost 40 years. 

The lack of standardized HR and pay management processes across federal public service, which comprises more than 200 organizations and around 380,000 employees, has led to significant challenges with the current pay system.

Phoenix’s pay system was designed to streamline the government’s $22-billion payroll and save $70-million annually, but instead took seven years to complete at a cost $310-million, according to a 2017 auditor general report.

PSPC signed a contract with Dayforce Inc. (formerly known as Ceridian) to test its human resources and pay systems platform in September 2021, and has been testing the human capital management platform provided by the contractor since 2022. 

According to PSPC’s final findings report, published on Feb. 1, Dayforce is a technically viable option for the federal government’s next HR and pay system. The analysis shows that by May 2023, Dayforce met 85 per cent of the government’s requirements, showing that it has demonstrated flexibility and configurability, and that gaps could be resolved by product enhancements, simplification, and standardization. It needs more testing before full implementation.

Dayforce uses a Software as a Service (SaaS) delivery model, which provides users with access to a service via the internet. The Canada-made platform combines payroll, HR, benefits, talent, and workforce management in a single cloud application. The system has more than six million users worldwide. 

Since the start of the testing phase, the initiative has engaged with over 4,750 people who could use the new solutions, including employees, managers, HR professionals, compensation advisers, and administrators from 50 government organizations.

Testing results were evaluated against four categories to determine technical viability, including functionality, complexity, accuracy, and the government’s mandatory requirements such as security, privacy, official languages, and accessibility. 

The platform has shown that it is flexible enough to respond to the complexities of the government’s needs for human resources and pay-related tasks, and complies with the IT structure in place, according to the assessment. It also meets the government’s mandatory requirements such as security, privacy, official languages, and accessibility.

While some gaps were identified during testing, these did not constitute critical shortcomings, according to PSPC.

“The work to stabilize our current operations and explore a new HR and pay system is happening in parallel,” said LaRose, who noted that over the coming months the government will continue to expand testing, and will design the system to its specific needs while exploring options for simplifying HR processes and procedures.

A final recommendation on the way forward for HR and pay is expected later this year, said LaRose.

“We are very pleased with the progress of the program and the strong partnership that we’ve established with the [government]” said Steve Holdridge, president of Dayforce, in a Feb. 16 email to The Hill Times.

In a follow up interview with The Hill Times, Carr said the amount of money that the government is spending on the new system is necessary, but that she questions whether “we’re just going to end up in the same situation.” 

“If we’re contracting out a system that should be done in-house, they’re not going to understand the complexities, they’re going to rely on contracting, and we’re going to have the same over-reliance on contractors,” she said.

Carr said PIPSC’s position is that contracting is necessary when there is a shortage of staff, or for a short-term need like surge capacity, or a specialty that isn’t available. 

“What we are insisting on the government is using those specialties for a short time and starting to invest in your internal people,” said Carr. “Not to just hand it off to a contract and let them continue to use a contract where it has provisions that says that you will staff, you will show people, and you will mentor them on the systems and that there will be an eventual handover of the system.”

That didn’t happen with the with the IBM contract with IBM, Carr said, “and I haven’t had confidence in the government that they’ve heard us that it has to happen with the next system that comes in.”

In a Feb. 6 email to The Hill Times, Aylward said “PSAC regularly meets with the government to provide our recommendations on the next-gen pay system and to ensure the Phoenix pay fiasco is never repeated.”

“While the next pay system is expected to enter the testing phase in the spring of 2024, a launch is still years away and offers no relief to workers who are still being impacted by the current Phoenix system,” he said. “The government must prioritize stabilizing the current pay system and eliminating the backlog of pay issues that continues to grow year over year and leads to frustration and hardship for workers every paycheque.”

In May 2019, PSPC sought bids from suppliers to provide operational support for the Phoenix pay system after the end of IBM’s original contract. While three firms responded to the invitation to qualify, according to PSPC, only IBM met the requirements, and a new contract worth $108.9-million was signed.

McKinsey & Company was also awarded a contract with total value of $27.7-million in February 2020 to provide consultation for work meant “to streamline processes and standardize work at the Public Service Pay Centre to increase efficiency and reduce processing times for pay transactions,” according to government records.

PSPC reported that there were 229,000 financial transactions in the Phoenix backlog as of Dec. 20, 2023. These are cases that are beyond the “normal workload” of 80,000 transactions.

ikoca@hilltimes.com

mlapointe@hilltimes.com

The Hill Times