Human resources and pay: Standing Committee on Government Operations and Estimates—March 22, 2023
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Phoenix IBM and pay stabilization procurement initiatives
Context
This note focuses on vendor support on the Phoenix file (IBM / Innovation challenge) as well as other pay stabilization procurement initiatives.
Note: All questions related to Next generation human resources and pay solution are in a separate question period card developed by Shared Services Canada (SSC).
Suggested response
- The Government of Canada is committed to supporting employees and resolving public service pay issues as quickly as possible
- Public Services and Procurement Canada (PSPC) has put in place over 3,000 systems enhancements and fixes, which have helped move the pay system to a more stable environment
- As a result, we have increased the overall system stability and improved performance in payroll processing
- We have and will continue to engage broadly with experts, federal public sector unions and the private sector to help further stabilize the pay system, and have strategic contracts in place to help us reach this goal
If pressed on the IBM contract history:
- In 2011 IBM was awarded the contract for the Phoenix pay system through an open and transparent competitive bidding process
- Between 2011 and 2022, there were 50 amendments to this contract, for a total contract value of $545 million (taxes included). Amendments are a regular part of the contract management process and provide the flexibility to adapt the contract deliverables to meet program requirements
- In May 2019, PSPC launched a competitive procurement process seeking qualified suppliers interested in providing ongoing operational support for the Phoenix pay system, once the original 2011 contract with IBM Canada Limited ended in March 2022
- Following a thorough evaluation of the 3 bids, it was determined that only IBM met the mandatory requirements. An independent fairness monitor observed that the procurement process was carried out in a fair, open, and transparent manner. The third party report is available on PSPC’s website
- PSPC negotiated technical, professional, software and support services to provide continuity to stabilize pay operations, and provide support services
If pressed on the McKinsey contract for accelerator services:
- The McKinsey & Company contract for accelerator services has helped increase the quality and productivity of pay processors at the Pay centre by streamlining processes and standardizing work leading to increased efficiency, reduced processing times, and building greater capacity through new ways of working
- In addition, innovations in onboarding and training new recruits are expected to result in employees contributing to case closures sooner
- The work to date has resulted in substantial increases in the productivity and accuracy of work across the teams at the Pay centre. For instance, as of December 7, 2022, the overall annual average number of cases processed by a compensation professional in a day has increased 14% compared to the same period in 2021
If pressed on the McKinsey contract amendment award for accelerator services:
- In February 2020, McKinsey & Company was awarded a contract through an open, fair, transparent and competitive procurement process
- In total, 2 bids were submitted and evaluated prior to issuing this contract
- McKinsey & Company has provided expertise required to streamline processes and standardize work at the Pay centre increasing efficiency and reducing processing times for pay transactions, and building greater capacity through new ways of working
- On November 1, 2022, PSPC exercised its final amendment of the Accelerator Services contract, to support the Pay centre in updating their training and onboarding program for new employees
- The work will include a review of onboarding practices and a redesign of training based on adult learning best practices
Phoenix salary overpayments
Context
This note focuses on Phoenix salary overpayments. A salary overpayment is an amount of money paid to an employee to which they are not entitled. Overpayments exist for current and former employees.
Notes:
- Questions related to the Directive on Terms and Conditions of Employment should be directed to the President of the Treasury Board
- Questions related to overpayment write-offs due to the 6-year statutory restriction should be directed to the President of the Treasury Board
- Questions regarding the tax implications of Phoenix payroll issues should be directed to the Canada Revenue Agency
Suggested response
- Our priority is to support current and former employees and resolve outstanding pay issues as quickly as possible, including the recovery of overpayments
- Overpayments to employees occur in all pay systems, and the recovery of those overpayments has been a part of Government of Canada activities, even before the implementation of the Phoenix pay system
- The recovery of overpayments from active and former employees, as well as employees in receipt of a pension, is also a normal part of the pay administration process
- In its stewardship role, the government has an obligation to recover outstanding overpayments
- Since the launch of Phoenix, over 260,000 current and former federal employees have reimbursed overpayments, or have made arrangements to do so. This represents over $2.5 billion in recovered funds
If pressed on support to current and former employees:
- We recognize that the recovery of overpayments can be stressful for those affected. Multiple measures have been put in place to support individuals experiencing financial hardship, including flexible repayment options
- The 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 the timeline stated in the letter, typically 4 weeks, they will continue to benefit from flexible repayment measures
- This means a flexible repayment plan can be put into 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
- For pensioners who do not make arrangements with their compensation office to repay their overpayments: the Receiver General will recover the overpayment from pension benefits through the Government of Canada Pension Centre:
- the collection of funds from former employees’ individual pension benefits is typically set at a rate of 10% of the monthly pension payment
- however, individuals claiming financial hardship may have their recovery rate lowered to a minimum of 5% of the monthly payment
If pressed on debt write-off of statute barred salary overpayments:
- The recovery of overpayments is part of the responsible handling of taxpayer funds, as the failure to do so would result in a significant loss to the Crown
- As part of its core responsibilities, PSPC supports federal departments and agencies by administering pay and benefits and pension plans for the Government of Canada
- Each department and/or agency is responsible for reporting their accounts receivables (debts owing to the Crown) to the Receiver General for inclusion in the Public Accounts
- The Pay centre does not have the authority to determine when an overpayment, in part or in whole, is statute barred. This determination is made by the client departments. Client departments, with the support of TBS, are also responsible for the submission of debt write-offs for statute-barred salary overpayments
- Outstanding salary overpayments stands at roughly $540.3 million (from 2016 to February 27, 2023)
Increase in the backlog
Context
This note focuses on the efforts and progress to stabilize the administration of pay, manage intake of pay transactions, and the ongoing reduction of the backlog.
Note: All questions related to Next generation human resources and pay solution are in a separate question period card developed by SSC.
Suggested response
- 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 received a significant increase in the number of transactions to process in 2021, and this increase accelerated 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
If pressed on the recent increases in the overall queue and backlog:
- Progress in reducing the queue of outstanding transactions has slowed as a result of significant increases in transactions received at the Pay centre
- We are working hard to manage new transactions within service standards to minimize and prevent the creation of new backlog transactions
- Many outstanding transactions are complex and require processing by experienced staff
- 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
- We remain committed to processing the most critical outstanding transactions first, prioritized by transaction age and impact on the employee
- I would note that significant staffing efforts are underway to build capacity within the Pay centre, with a goal of 525 new hires this fiscal year
Pay stabilization and Next generation human resources and pay initiatives
Context
This note focuses on efforts and progress to provide support to employees and stabilize the administration of pay, financial investments in Phoenix and the Next generation human resources and pay initiative.
Notes:
- All questions related to the mental health of public servants, collective agreements and compensation for Phoenix damages agreements should be directed to the President of the Treasury Board
- Issues related to income tax are under the purview of the Canada Revenue Agency (CRA). Questions related to the taxability of damages payments should be directed to CRA
Suggested responses
- The Government of Canada is committed to supporting employees and continues to take action on all fronts to resolve public service pay issues
- Since the launch of Phoenix, we have implemented a series of measures and made consistent progress towards pay stabilization
- We have put in place over 3,000 system enhancements and fixes, which have increased the stability of the pay system and overall pay administration environment
- The Next generation human resources and pay initiative aims to test the viability of a commercial grade pay and human resources solution to replace the current pay system as well as more than 33 human resource systems, and several peripheral systems and applications
- Next generation human resources and pay initiative is currently testing a solution against the complexities of the Government of Canada’s human resource and pay requirements
If pressed on the backlog:
- As of February 15, 2023, the backlog of financial transactions beyond the normal workload has decreased by 46% since the peak of January 2018, representing a reduction of 176,000 transactions
- Over the same period of time, the overall queue of transactions waiting to be processed at the Pay centre has decreased by 35%, representing a reduction of 222,000 transactions
- We continue to review the future resource needs of the Pay centre to ensure public servants are paid accurately and on time
If pressed on support to employees:
- 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, and implementing technical fixes that have improved payroll processing, such as increased automation of transactions
- Improved automation has helped mitigate some of intake's growth. Between 2019 and 2022, net intake increased by 28%, but manual workload only increased by 11%
- Financial support is and will remain available for employees missing any of their pay. This support includes an emergency salary advance or priority payment
- Flexible measures have been put in place to help minimize financial hardships for employees for the repayment of overpayments related to Phoenix pay system issues
- The client contact centre escalates cases of hardship so they can be addressed quickly, and agents are trained to respond to situations where employees may be in distress
If pressed on specific actions:
- 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
- We implemented a Retro Redesign Solution that further automates processing of individual late transactions and eligible mass retro payments
- In April 2021 we launched the MyGCPay stub–designed to be more user-friendly and to help employees better understand their pay
- 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 December 2022, pre-2020 outstanding transactions decreased from 117,000 to 55,000 (53%)
- In addition, we are increasingly meeting service standards. In 2022, the Pay centre met service standards 83% of the time on average, compared to 80% in 2021, and 72% in 2020
If pressed on next steps on the Next generation human resources and pay initiative:
- Next generation human resources and pay is working to complete viability testing this spring with a view of providing a recommendation to government later in 2023
- This work is part of a broader Government of Canada (GC) enterprise information technology approach, replacing legacy systems with modern digital solutions. It is a fundamental transformation of how the government does business. To achieve this, we are working closely with the Treasury Board Secretariat Office of the Chief Human Resources Officer
If pressed on the cost of the Next generation human resources and pay initiative:
- The initiative is assessing the total cost of ownership of major components of an human resources and pay system as we develop the recommendation for government
- The full cost to implement a new system, including ongoing operational costs, will be determined when a solution has been tested and determined to be viable
If pressed on the testing approach of pay and human resources solution:
- Testing is being conducted with partner departments in a separate digital environment while employees continue to be paid through the current pay system
- Testing allows the Next generation human resources and pay team to learn what the GC, as an enterprise, may have to change in our practices to be in a position to effectively leverage a commercial grade human resources and pay solution
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