Archived: Opening Statement by Judy M. Foote Minister of Public Services and Procurement Canada - Before the Standing Committee on Government Operations and Estimates

Phoenix Update and Budgetary Request under Supplementary Estimates (B)

OTTAWA, Ontario, November 29, 2016

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Introduction

I am pleased to provide another update to the Standing Committee on Government Operations and Estimates on the Phoenix pay system, as I had committed to do so during my last appearance. I am also pleased to participate in the committee’s review of the Supplementary Estimates (B) for both Public Services and Procurement Canada and Shared Services Canada.

Allow me to repeat that it is completely unacceptable for any employee to not receive the pay they earn. I have been seized with this issue since pay problems first emerged, and fixing the Government’s pay system is a top priority.

Mr. Chair, public service pay is complex and unique: There is no other pay system in the country with almost 300,000 employees, across 101 departments with 27 collective agreements and 80,000 business rules.

The planning of Phoenix and the broader pay transformation initiative was flawed. But casting blame doesn’t help public servants facing frustrating pay delays. They need solutions.

What’s been done to date

When I was made aware of the extent of the problem, I took early and decisive action.

Many measures have been put in place since late spring to address pay issues and support employees.

I announced the creation of a satellite unit in Gatineau to immediately begin working on the backlog. Over the summer, we added and staffed three additional satellite offices in Shawinigan, Winnipeg and Montreal to provide additional support. I committed to keeping these offices until the backlog is eliminated and issues are resolved.

We’ve taken several steps to better support employees. We established a new call centre and a Phoenix feedback form to make it easier for employees to reach us and report pay problems. We have communicated regularly about the availability of Emergency Salary Advances so that employees get the salary that they deserve. We also provided regular updates to media and employees on our progress.

On the training front we updated our materials for managers and employees and made more information available on our web. We also provided targeted training sessions to human resources advisors on how to effectively work with Phoenix.

The Department implemented system enhancements to improve how Phoenix functions and to increase automation.

Finally, we worked closely with all of our partners. The Treasury Board Secretariat put in place a claims process to repay employees who have incurred costs related to pay issues, such as interest charges. The Canada Revenue Agency has information on their web site and a 1-800 number for employees concerned about the tax implications of pay issues. And we continue to collaborate with unions on a number of fronts, including a recent agreement to have government IT specialists help enhance Phoenix.

These measures have allowed us to make significant progress, but more still needs to be done. Let me turn now to our efforts going forward.

The Backlog

When I last updated the committee, my officials and I discussed our goal to eliminate the backlog of approximately 82,000 employee pay cases by the end of October. Despite our best efforts, we could not completely eliminate the entire backlog and to date we have closed the cases of 83 percent of employees in the backlog.

The majority of cases left in the backlog predate Phoenix, some stretching back several years. These are complex cases that require time-consuming manual calculations. We are seeing cases that date back several years and involve multiple transactions. For example, when dealing with a retirement, it is common to first have to close several related pay transactions, such as salary increment increases, actings and promotions. And once all of these files are closed, there are additional transactions needed, such as termination payments and severance payments, before final payment to an employee can be issued. This process can be very lengthy where we are dealing with old files and the verification of salary and other amounts is required.

As of today, approximately 15,000 public servants still remain in the backlog. It is important to note that these cases involve supplementary pay. That said, missing pay of any sort is concerning and a priority to address.

These remaining cases are being handled by a dedicated group of expert compensation advisors, and our goal is to process them as quickly as possible.

Steady State

During my last appearance, I also spoke about reaching a steady state, where pay transactions are processed efficiently, consistently, and with minimal errors.

We are now seeing much higher rates of productivity in our pay offices. Users have become more accustomed to the system and incoming pay requests are now processed more quickly and efficiently. For example, in May, we processed about 40,000 pay transactions. However, in September and October, that number increased to approximately 100,000 transactions per month.

The dip in processing productivity after Phoenix was implemented had an impact on the case load being carried in the pay system. For a period of time, we received more transactions than we could address.

Our Plan

Because of this situation, we had to refine our plan to reach steady-state, which includes the following three elements:

1. A concentrated, expert team to eliminate the backlog.
2. A prioritized approach for the timely processing of cases in, or entering, the pay system, and
3. A process of validation and improvement.

This plan considers productivity rates, incoming work, the availability of employees, and other variables. It also prioritizes cases that may cause employees financial hardship or have tax implications, namely those with disability claims, returning from leave, terminations and new hires.

A key lesson taken from the Phoenix experience has been the need to consult widely and validate. This is why I have told my department to review the plan and its assumptions with other client departments, employees and unions. This focus on validation will ensure we have a robust and reliable go-forward approach. Many good ideas on how to improve the pay system have come from front-line compensation advisors.

Steady state won’t happen tomorrow but we are seeing progress. The processing times for certain transactions have already improved. For example, overtime is now processed automatically once entered and approved into the system.

Employees

Much of the discussion around Phoenix has focused on software, but at the heart of our pay system are people. Those using the system and those depending on it for their pay.

In our Public Service Pay Centre in Miramichi, which I visited again this month for the third time, we are currently training our next generation of compensation advisors. A few weeks ago, the department welcomed a new class of 91 recruits who have started the one-year training program that will give them the skills needed to work at the Pay Centre.

The program ensures the presence of a constant pool of qualified compensation experts.

Tax Implications

As the year-end approaches, we are acutely aware that employees who were not paid correctly are worried about tax implications.

Public Services and Procurement Canada is working closely with the Treasury Board Secretariat, the Revenue Agencies and the unions to minimize the potential for problems and to ensure that employees have the information they need.

Employees can visit the CRA website or contact their call center for general enquiries about taxes. Employees looking for information on their T4 slips can contact the Phoenix call center.

Support for Employees

There is a significant effort underway to support employees experiencing pay issues.

If employees have been overpaid, these amounts will be recovered over multiple pay periods to lessen the impact. We are working directly with employees facing financial hardship to identify other payment arrangements if needed.

And those who have incurred out-of-pocket expenses as a result of missing pay can seek reimbursement through a Treasury Board Secretariat claims process.

I understand and appreciate this has been a very difficult situation, and I appreciate the patience of everyone whose pay has been affected.

Thank you to the staff who are working hard to process pay transactions. On my most recent visit to the Pay Centre in Miramichi, I heard from employees about the progress being made and the challenges that still remain. This team is dedicated to helping their colleagues across the Government, and I expressed to them my support and gratitude.

Lessons Learned

There are important lessons to be learned from this experience, and this is why I called the Auditor General of Canada to do a full review of the Phoenix project.

In the meantime, I have put on hold plans to transition additional departments to the Pay Centre.

The Government needed a new pay system. However, the planning of Phoenix and the broader Pay Transformation Initiative were driven by cuts instead of service. The former Government sought annual savings of $70 million at the expense of employees.

Mr. Chair, I don’t need to convince anyone that Phoenix should have been better planned and implemented. Pay transformation was compromised as soon as the decision was taken to eliminate the jobs of some 700 compensation staff before we had transitioned to Phoenix. Had we kept those jobs longer, we would not be in the situation we are in today.

We have been working very hard to address pay issues. Our backlog is over 80% eliminated, processing rates are up and we now have a plan to arrive at our steady state.

There is still much to do and Deputy Minister Lemay will provide a new update on December 14th on our progress towards resolving backlog cases and an update on our plan to reach steady state.

Supplementary Estimates (B)

Turning now to the department`s Supplementary Estimates (B), but keeping with Phoenix. The Department identified the need for an additional $50 million in extraordinary funding and is requesting this funding in Supplementary Estimates (B). We discussed this figure when I appeared before you in September.

This funding is comprised of:

• $5.7 million for additional support from IBM, such as 24/7 troubleshooting support, and refinements to the system;
• $24 million for our satellite offices and call centres;
• $16.1 million for our complaints centre; training and support to departments; and system maintenance;
• And $4.2 million for contingencies.

Now to Shared Services Canada’s Supplementary Estimates.

Shared Services Canada is seeking additional funding of $4.7 million, which will be largely used to support initiatives underway at client departments. For instance, $1.6 million is going to help modernize Canada’s Weather Radar Network for Environment and Climate Change Canada. Other funding is directed to support ongoing projects at Immigration, Refugees and Citizenship Canada and the Canada Revenue Agency. $1.5 million is earmarked for added telecommunications costs related to new government employees.

These investments strengthen and complement the work of Shared Services Canada as it also resets its Transformation Plan.

Thank you for your attention. I am happy to answer your questions.