Human resources and pay: Standing Committee on Government Operations and Estimates—November 24, 2022
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Phoenix IBM and pay stabilization procurement initiatives
Key messages
- Public Services and Procurement Canada has put in place over 3,000 system enhancements and fixes, which have helped move the pay system to a much steadier environment
- As a result, we have increased the overall system stability and improved performance in payroll processing
- We continue to reach out to experts, federal public sector unions, and the private sector for innovative solutions to help further stabilize the pay system
- For example, McKinsey & Company has provided expertise required to streamline processes and standardize work at the Pay Centre, so as to increase efficiency and reduce processing times for pay transactions, as well as to build greater capacity through new ways of working
- The work to date has resulted in substantial increases in the productivity and accuracy of work across the teams at the Pay Centre
Key data points
- Investments in Phoenix:
- the initial investment to develop Phoenix was $309 million. This included the IBM contract, other professional services contracts and program costs (example: delivery costs for the transformation of pay administration initiative)
- additional investments to ensure that public servants are paid accurately and on time total $2.19 billion. These investments are critical to ensuring adequate resources are available to continue efforts to eliminate the backlog, maintain pay delivery, support employees and stabilize pay. Moreover, these investments have resulted in greater capacity, enhanced technology and support for the workforce dedicated to processing pay transactions to eliminate the backlog
- IBM contract total values:
- for the Phoenix pay system from 2011 to 2022: $545 million (taxes included)
- for the pay system support contract, including application managed services for Phoenix, stabilization activities, enhancements and optional support services to Shared Services Canada (SSC) for a NextGen system: $108.9 million (including taxes and contingency)
- McKinsey & Company contract for accelerator services currently totals $27.7 million (taxes included)
Background
IBM contract and amendments
In June 2011, IBM Canada Limited was awarded the contract for the new pay system through an open and transparent procurement process that was overseen by a fairness monitor. Between June 2011 and December 2020, there were 50 amendments to this contract, for a total contract value of $545 million (taxes included). This contract ensured ongoing application managed services for critical 24/7/365 operational (functional and technical) support for pay. It included software maintenance and support services essential for pay stabilization, including the upgrade of the Phoenix PeopleSoft software to version 9.2.
In May 2019, Public Services and Procurement Canada (PSPC) launched a competitive procurement process seeking suppliers to provide ongoing operational support for the Phoenix pay system, once the original 2011 contract with IBM Canada ended in March 2022.
Three firms responded to the process, but only IBM Canada met the mandatory requirements. A new contract with IBM is in place until March 31, 2023, with a value of $108.9 million, including taxes and contingency. It provides support for functional, technical, and payroll processing functions via an application managed services model for the Phoenix pay system and contains 11 additional 1-year options that will be exercised as needed. An independent fairness monitor observed the procurement process and has not raised any fairness concerns.
Robotic process automation
Robotic Process Automation (RPA) is one of several ongoing initiatives to help reduce the backlog and stabilize the pay system. PSPC is using RPA services to automate highly repetitive manual transactions to increase efficiency and accuracy in pay processing. This means that compensation employees at the Pay Centre can focus their expertise on more complex cases and address even more transactions in the backlog.
Following a competitive process, a contract was awarded to IBM on January 19, 2021, which allowed PSPC to build on the RPA work completed and accelerate the automation of pay processing. PSPC is now leveraging additional crown resources with expertise in innovative technologies to support all ongoing RPA activities. This includes knowledge transfer from vendor to public servants thus reducing sole reliance on professional services and increasing internal capacity.
Accelerator services contract amendment
The objective of the accelerator services project is to streamline processes and standardize work at the Public Service Pay Centre to increase efficiency and reduce processing times for pay transactions. McKinsey & Company was awarded a contract in February 2020 as a result of a competitive procurement process. On May 31, 2021, PSPC amended this contract to improve process and performance across more Pay Centre teams. On December 10, 2021, PSPC amended the contract again to complete the deployment of accelerator services across more Pay Centre teams and expand the services to a new sector. Total contract value is now $27.7M (taxes included).
Under this contract, McKinsey & Company is providing consulting services to transform ways of working, including management practices and tools, to improve both productivity and the experience of our clients and client organizations. They are also implementing strategies to increase efficiency and reduce errors, which will lead to decreased wait time for employees’ pay issues to be processed.
Phoenix overpayments
Key messages
- Recovering salary overpayments has always been part of the Government of Canada activities, even before the implementation of the Phoenix pay system
- In its stewardship role, the government has an obligation to recover outstanding overpayments. Since the launch of Phoenix, thousands of current and former federal employees have reimbursed overpayments, or have made arrangements to do so
- We recognize that the recovery of overpayments can be stressful for those affected, and multiple measures have been put in place to support individuals experiencing financial hardship, including flexible repayment options
- Overpayment letters sent to employees provide detailed information on the pay event that led to the overpayment, as well as the steps to follow should they have questions about the overpayment amount identified
- If an employee acknowledges the overpayment within 4 weeks from the date of the letter, they will continue to benefit from, and be eligible for, flexible repayment measures
- This means a flexible repayment plan can be put in place and recoveries would only start when:
- all of the employee’s outstanding transactions have been addressed
- the employee has received 3 consecutive correct pay cheques
- a recovery agreement has been confirmed by the employee
Key data points
- Since the launch of Phoenix, approximately 372,000 employees have been identified as having received either an administrative overpayment or true overpayment, totaling $3.02 billion
- As of October 2022, overpayments were repaid by approximately 252,000 of those employees, representing a total of approximately $2.46 billion in recovered funds
- As of October 2022, approximately 120,000 employees have an outstanding overpayment balance. The outstanding overpayment arrears stand at approximately $559 million
Background
Recovery of overpayments supports the Government of Canada’s mandate to resolve outstanding Phoenix pay system issues for public servants once and for all. Salary overpayments impact current and former public service employees across departments and agencies, and across the country.
In collaboration with the Office of the Comptroller General, Public Services and Procurement Canada has established recovery strategies:
- for all employees: priority had originally been given to files with overpayments from 2016, now moving to 2017, in order to protect the Crown’s right to recover these overpayments
- for pensioners: the Receiver General has put in place a strategy to recover overpayments from pension funds through the Government of Canada Pension Centre
- for former employees who left without a pension: the Receiver General is providing support and guidance to departments and agencies
In order to protect the Crown’s right to recover overpayments within the 6-year statutory restriction, active employees must first acknowledge their overpayments to access repayment flexibilities put in place by the Office of the Chief Human Resources Officer. Once overpayments are acknowledged, repayment flexibilities allow employees to delay recovery of their overpayments until their pay file is reconciled and they have received their correct pay for 3 consecutive pay periods.
The flexible measures have been put in place to help minimize financial hardships for employees for the repayment of overpayments. Current employees and pensioners facing financial hardship can have their recovery rate, traditionally set at a rate of 10% of their regular payment, lowered if requested.
Active employees who do not acknowledge their overpayment will be subject to recovery, as per the guidelines provided in their overpayment acknowledgement letter. Former employees are not eligible for the repayment flexibilities, and the Crown has the right to recover overpayments from first available funds.
The Receiver General and Pension Branch has resumed the collection of overpayments from pensioners previously employed by departments and agencies served by the Public Service Pay Centre.
Departments and agencies not served by the Public Service Pay Centre are responsible for recovery of funds from their current and former employees, though the Government of Canada Pension Centre does assist with recovery from pension recipients when requested.
Administrative overpayments / true overpayments
Administrative overpayments were a normal part of the pay administration process and used to ensure employees were paid accurately. They would be generated when an employee’s acting assignment was entered late and were automatically recovered at the time of the acting assignment’s retroactive payment. This allowed the pay system to automatically reconcile the difference between the regular salary rate and the acting salary rate in subsequent pay periods without affecting the employee’s pay. As of October 2020, a new process was put in place and these type of overpayments are no longer created for this purpose.
True overpayments usually occur when certain pay transactions are not submitted or processed promptly. Some situations are related to late entry / late processing where timeliness of the delegated human resources (HR) manager is key. Some situations are related to unforeseen work-life events. This is a normal part of day-to-day compensation operations.
Increase in backlog
Key messages
- Canada’s public servants deserve to be paid accurately and on time, every time
- Due to changes in the public service and many priorities affecting pay, the Pay Centre experienced a significant increase in the number of transactions to process in 2021, and this increase continues in 2022
- The Government of Canada remains committed to resolving pay issues for public servants, reducing the number of outstanding transactions and continuing to implement numerous measures to improve and support pay stabilization
Key data points
- Intake and workload at the Pay Centre has grown. Net intake as of October for the 2022 calendar year is now over 1 million cases (1.07 million), closing in on the total intake for 2019 (1.15 million), surpassing 2020’s total intake (1.03 million), and on track to exceed 2021’s total intake of 1.23 million by 21%
- PSPC continues to make progress on older cases, but that progress has slowed as intake, and therefore the overall queue of work, has grown. These outstanding transactions, both intake and backlog, are not errors—they represent the normal pay administration work we do to support our client population
- In March 2021 the backlog of financial transactions beyond the normal workload was 94,000 cases (a decrease of 76% since the peak of January 2018). As of October 26, 2022, it has grown to 207,000 cases (an increase of 120% since March 2021)
- In March 2021 the overall queue of transactions waiting to be processed at the Pay Centre included 261,000 cases (a decrease of 59% since the peak), but as of October 26, 2022, there are 409,000 cases (an increase of 57% since March 2021)
- The upward trend is a reflection of the persistent intake pressures at the Pay Centre
- To date in 2022, the Pay Centre has processed 109,000 (13%) more transactions compared to the same period last year, all the while receiving 169,000 more transactions; a 19% increase from the previous year
- In addition, we are increasingly meeting service standards. To date in 2022, the Pay Centre has met service standards 83% of the time on average, compared to 80% in 2021, and 72% in 2020
Background
The number of transactions processed each month varies based on a number of factors, such as the complexity of cases, collective agreement implementation and seasonal trends. Intake also shows seasonal trends, with peaks at the end of the calendar year, the end of the fiscal year, and the end of summer, which marks the completion of many casual and student work terms.
Although the Pay Centre processed 55,000 more transactions in 2021 compared to 2020, the increase in output was outpaced by an increase in intake, with 178,000 more transactions received in 2021 compared to 2020. This trend has continued in 2022. As of October 2022, the Pay Centre has processed 109,000 more transactions compared to the same period in 2021. The volume of intake in the second quarter of 2022 to 2023 was 28% higher than the second quarter of 2021 to 2022. The growth in intake is driven by the increase in the population of departments served by the Pay Centre as well as changes in per capita intake trends. Per capita intake is now higher than it was in 2019, having fully rebounded from the dip that began in March 2020.
Improved automation has helped mitigate some of intake's growth. Between 2019 and 2022, intake (such as the number of transactions received) has increased by 22%, but workload (such as the number of transactions requiring manual processing) has only increased by 7%.
In addition, new challenges have been affecting progress to eliminate outstanding transactions and keep up with new intake since March 2021. These challenges include the high complexity of transactions that remain in the backlog, as well as government-wide operational and HR policy priorities which have contributed to workload increases. Examples include critical system upgrades during the summer of 2021, as well as classification conversion, implementation of the mandatory vaccination policy and leave without pay processing, vacation/compensatory leave cash-out, and others.
We continue to focus on addressing outstanding transactions while also working towards processing new transactions within service standards 95% of the time. For example, from December 2020 to August 2022, pre-2020 outstanding transactions decreased from 117,000 to 59,000 (50%).
We are ensuring that the most complex cases are assigned to our most experienced staff, and we are fast tracking hiring efforts to fill vacancies. Significant staffing efforts are underway to build capacity within the Pay Centre, with a goal of 525 new hires this fiscal year.
Latest Public Service Pay Centre dashboard figures
As of October 26, 2022, there are 409,000 transactions ready to be processed for Pay Centre client department and agencies, including:
- 207,000 transactions with financial impact, which include: 185,000 beyond Pay Centre’s normal workload, and 22,000 repatriated to home departments and agencies for processing and closure
- 80,000 financial transactions that are part of Pay Centre’s normal workload
- 63,000 transactions with no financial impact, or general inquiries
- 5,000 collective agreement transactions
- 54,000 transactions waiting to be closed for which employees have already received payment
Update on pay stabilization support for employees and investments
Key messages
- The Government of Canada is committed to supporting employees and continues to take action on all fronts to resolve public service pay issues
- Financial support will remain available for employees missing any of their pay. This support includes an emergency salary advance or priority payment
- The Client Contact Centre is available to all current and former federal public service employees with pay and benefits questions
- We have introduced MyGCPay to all departments and agencies serviced by Phoenix. MyGCPay is a web application that provides employees with a centralized and simplified view of their pay and benefits, to help employees better understand their pay
- While there is still much work to do, we continue to progress towards pay stabilization, to ensure federal government employees across Canada are paid accurately and on time
Key data points
- Since the launch of Phoenix, we have implemented a series of measures and put in place over 3,000 systems enhancements and fixes, which have helped move the pay system to a much steadier environment
- On average, MyGCPay has had over 330,000 visits from employees across the Government of Canada each month since its launch in November 2019
- Collective agreement implementation salary adjustments and retroactive payments for the 2018 round have been completed through the automated process for 140 agreements, representing over $2 billion in payments to employees (as of October 2022)
- Total investments to deliver pay, maintain the pay system, address the backlog and address pay issues is $2.19 billion. These investments are critical to provide greater capacity, enhanced technology and support for the workforce dedicated to processing pay transactions to eliminate the backlog
Background
Stabilizing the administration of pay
Since the launch of Phoenix, PSPC has implemented a series of measures focused on stabilizing the administration of pay. These include providing employees with greater support through our Client Contact Centre, introducing the pay pods model, implementing a one pay-processing workforce approach that strategically aligns pay processors’ skillsets to the pay workload, and implementing technical fixes that have improved payroll processing, such as increased automation of transactions.
Flexible measures have been put in place for employees to help minimize financial hardships related to Phoenix pay system issues. Cases of hardship are escalated through various channels, including the Client Contact Centre, so they can be addressed quickly
We are working closely with all our partners, including employees, unions, members’ of Parliament offices, departments and their representatives from HR and pay, to support our employees and resolve public service pay issues as quickly as possible.
MyGCPay
MyGCPay is a web application developed by PSPC to help rebuild federal government employees’ confidence in the integrity of their pay. It provides employees with a centralized and simplified view of their pay and benefits. It helps employees identify pay issues earlier and allows them to monitor their open cases with more detail. Following consultations with Government of Canada employees, the MyGCPay project team introduced a new and improved pay stub in April 2021.
Investments in Phoenix
This section provides an historical record of investments to deliver pay and respond to pay issues. The current total is $2.19 billion:
- $50 million (2016) PSPC—build capacity, enhance technology, employee support
- $141.7 million (2017)—build capacity, enhance technology, employee support. This included $15 million for Treasury Board of Canada Secretariat (TBS) and $127 million for PSPC
- $454.2 million (Budget 2018) PSPC/TBS—build capacity, enhanced technology, and employee support
- $5.5 million (Budget 2018) Canada Revenue Agency (CRA)—process income tax reassessments needed due to pay issues
- $16 million (Budget 2018) TBS—work with experts, federal public sector unions and technology providers on a way forward for a new pay system
- $555.8 million (Budget 2019) PSPC—ensure adequate resources to address pay issues; support system improvements. This included $25.1 million for TBS and $530.7 million for PSPC
- $9.2 million (Budget 2019) CRA—process income tax reassessments needed due to pay issues
- $910 million (Budget 2020)3-year forward plan funding, to continue efforts to eliminate the backlog of pay issues for public servants, maintain measures to deliver pay and support employees, and stabilize pay for the Government of Canada
- $47 million (Budget 2021) over the next 2 years to support the workforce dedicated to processing pay transactions
Next generation human resources and pay initiative
Key messages
- Every federal government employee should be paid accurately on time, every time
- NextGen HR and Pay is part of a broader Government of Canada (GC) enterprise information technology (IT) approach, replacing legacy systems
- This work involves modernizing the HR and pay landscape with modern digital solutions. It is currently in the design and experimentation stage and is testing a proposed solution against the owner of the GC HR and pay requirements
- All testing is happening outside of the existing HR and pay systems—no employee’s pay is affected while testing is taking place
- A recommendation out of this agile experimentation process is expected in 2023
If pressed on contracts:
- using an innovative and iterative procurement process, NextGen HR and pay qualified 3 vendors for the initiative: SAP, WorkDay and Ceridian, with an option to pivot to a different pre-qualified vendor, if required
- in September 2021, this option was used to pivot to a new vendor (Ceridian) for design and experimentation after the initial contract expired with SAP
Key data point
- The NextGen HR and Pay Team has engaged a broad representation of employees across the government through a wide variety of forums, such as presentations, information sessions, and over 600 hours of workshops across 27 federal organizations
Background
Budget 2018 announced the GC’s intention to move away from the current pay system and begin the development of a new one that will be better aligned with the complexity of the federal government’s human resources and pay structure.
Treasury Board of Canada Secretariat received $16 million over 2 years, beginning in 2018 to 2019, to explore replacement options for a NextGen HR and pay solution.
$113.1 million in funding was allocated for the Next Generation HR and pay initiative until 2023. In collaboration with several departments, the initiative is testing a proposed solution against the complexities of the GC’s HR and pay requirements, clearly defining what needs to change so the government can successfully adopt a new solution, such as business processes and how employees access and use HR and pay systems.
Effective April 1, 2020, leadership for NextGen HR and pay was transitioned from TBS to Shared Services Canada. The chief human resources officer at TBS remains the business owner and a key collaborator of the NextGen HR and pay initiative.
NextGen HR and oay is using an agile procurement process to move forward and quickly adapt to changing circumstances. Using this innovative and iterative procurement process, the initiative qualified 3 vendors (SAP, WorkDay and Ceridian) for the NextGen HR and pay solution, with an option to pivot to a different pre-qualified vendor, if required. In September 2021, this option was used to pivot to a new vendor (Ceridian) for design and experimentation after the initial contract expired with SAP.
The built-in flexibility within the contract, where all 3 pre-qualified vendors remain under contract, will enable for course corrections throughout the identification of the solution. Lessons learned will be applied immediately, leading to a better solution.
On October 14, 2020, the selection of the Department of Canadian Heritage for the exploratory stage of the Next Generation HR and pay initiative was announced.
Canadian Heritage was selected as the pilot department for the exploratory phase because their organization provides a good representation of the government’s human resources complexities, including multiple occupational groups, regional representation, overtime, and other considerations.
On July 27, 2021, the Government of Canada announced the expansion of testing to include the Department of Fisheries and Oceans and the Canadian Coast Guard and Canada Economic Development for Quebec regions and further expanded in 2022 to include Crown-Indigenous Relations and Northern Affairs Canada and Indigenous Services Canada.
Throughout this process, the NextGen HR and Pay Team is engaging with federal employees, leaders, HR advisors and technical specialists, as well as working hand-in-hand with bargaining agents in the development of a user-centric HR and pay solution.
The NextGen HR and Pay Team has engaged a broad representation of employees across the GC through a wide variety of forums, such as presentations, information sessions, and over 600 hours of workshops across 27 federal organizations. The feedback received has informed the work completed to date and will continue to do so throughout phase 1 of the initiative.
Any testing undertaken will not affect employees’ actual pay. All testing for the NextGen HR and pay initiative will continue to take place in parallel with existing HR and pay systems.
The GC continues to work with stakeholders, such as bargaining agents, employees, and HR and pay practitioners, and will continue to engage in an open and transparent manner, so that the new solution can address the needs of a modern public service and its employees as soon as possible.
A recommendation to the GC is expected in 2023.
Leading up to 2023, the NextGen HR and pay initiative will carry out additional testing layering on complexity and a feasibility study that will continue to inform the way forward.
Ongoing stabilization of the current GC pay system remains a top priority for the government and is being managed by Public Services and Procurement Canada.
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