Phoenix: Standing Committee on Government Operations and Estimates—November 16, 2020

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Human resources-to-pay integrated team

Key facts

Total investments to deliver pay and respond to pay issues since the launch of Phoenix is $1.381 billion:

• $50 millions in 2016 to address issues after Phoenix rollout
• $142 millions in 2017 to build capacity, enhance technology, employee support ($15 millions for the Treasury Board Secretariat (TBS) and $127 millions for Public Services and Procurement Canada (PSPC))
• $431.4 millions via budget 2018 (accrual), plus $16 millions (TBS) for work towards a new pay system, plus $5.5 millions (Canada Revenue Agency (CRA)) to assist in processing tax reassessments
• $523.3 millions over 5 years via budget 2019 (accrual), starting in 2019 to 2020, to ensure adequate resources to address pay issues
• an additional $9.2 million to CRA to process income tax reassessments needed due to pay issues
• $203.5 millions via Supplementary Estimates (A) 2020 to 2021, to eliminate the backlog of pay issues for public servants and continue delivering and stabilizing pay

Under the transformation of pay administration initiative, we consolidated and transferred pay services from 46 departments and agencies to the Public Service Pay Centre. It serves more than 200,000 employees.

Top issues

Capacity

• 14 offices across the country (includes the Pay Centre in Miramichi and regional offices)
• Multiplied the compensation workforce four-fold since 2016
• More than 2,300 compensation employees across the Pay Centre, Client Contact Centre, and Client Service Bureau

Public dashboard (as of October 28, 2020):

• approximately 281,000 transactions awaiting processing at the Pay Centre:
  • 190,000 transactions with financial impact, which include:
    • 110,000 beyond our normal workload
    • 80,000 that are part of our normal workload
  • 46,000 transactions with no financial impact, or general inquiries
  • 10,500 collective agreement transactions
  • 34,500 transactions waiting to be closed for which employees have already received payment

Collective agreements

• For the 2014 round, 126 TBS and separate employer agreements and salary rate updates have been processed, representing almost $2.5 billion in payments to employees
• Successfully developed a new automated mass retroactive process for the implementation of the 2018 round of collective agreements. We expect that under 10% of these collective agreements transactions will need manual intervention, resulting in a reduction of hundreds of thousands of manual transactions

Taxes

• Year-end tax planning includes clear direction on robust testing, completion of dry runs, quality and integrity verification of data, implementation of tax updates, and communication of year-end information to the compensation community and employees
• PSPC continues to actively work with departments and agencies to communicate with employees who may receive amended tax slips
• Tax slips for 2019 were released to federal employees on a staggered schedule by the end of February 2020
• Successful 2019 tax-filing season with fewer data issues, no major system concerns, and fewer inquiries from clients

Overpayments and repayment options

• Amended the TBS Directive on the Terms and Conditions of Employment—the system will not proceed with the recovery of overpayments until certain conditions are met
• Created the TBS Claims Office to compensate employees who have incurred expenses or financial losses
• Changes made to the Income Tax Act that allow affected employees to repay only the net amount of the overpayment received in a previous year, rather than the gross amount

IBM contract

• 48 amendments to the original contract since June 2011, for a total contract value of $447 millions (taxes included)
• The most recent amendment to the existing contract with IBM was required to exercise options for software maintenance and to continue support services essential for pay stabilization and PeopleSoft version 9.2

Innovation

• Industry has been consulted in several areas identified as key to reaching stabilization (for example robotic process automation (RPA), accelerator services)
• Introduced MyGCPay and developing a new online pay stub
• New automated mass retroactive process for the implementation of 2018 collective agreements

Accomplishments

• Since January 2018, Pay Centre departments have seen a 56% decrease in the number of transactions awaiting processing, representing a reduction of over 352,000 transactions (from 633,000 to 281,000), as of October 28, 2020
• Over the same period of time, the backlog of transactions with financial implications beyond normal workload has decreased by 71%, representing a reduction from 384,000 to 110,000 (274,000 transactions)
• All departments and agencies served by the Pay Centre have transitioned to the pay pod model
• The Client Contact Centre has been enhanced to provide better support to employees, including the ability to resolve pay issues in a faster and more effective way at the first point of contact
• Launched MyGCPay—an innovative new web application that provides employees with a centralized and simplified view of their pay and benefits, and helps them identify pay issues earlier and monitor their open cases with more detail
• Implemented the retro redesign solution, which further automates processing of individual late transactions as well as eligible mass retro payments
• Multiple technical changes to stabilize the system have been implemented, including over 2,500 systems fixes/enhancements

Phoenix overall queue and backlog decrease

Context

This note focuses on the ongoing reduction of the overall queue and backlog, implementation of collective agreements, taxes, overpayments and underpayments.

Suggested response

• Employees deserve to be paid accurately and on time
• Resolving pay issues is a top priority and thanks to the hard work of our compensation employees, we are seeing progress
• As of October 28, 2020, the backlog of transactions with financial implications has decreased by 71% since the peak of January 2018, representing a reduction of 274,000 transactions, from 384,000 to 110,000
• Over the same period of time, the overall queue of transactions waiting to be processed at the Pay Centre has decreased by 56%, representing a reduction of 352,000 transactions, from 633,000 to 281,000
• We have also processed close to $2.5 billion in collective agreement retroactive payments to employees, for the 2014 round

If pressed on the new collective agreement and Phoenix damages compensation with the Public Service Alliance of Canada:

• TBS is responsible for engagement with Public Services and Procurement Canada (PSPC), employees and unions on collective and compensation agreements
• PSPC is working with TBS to ensure that collective agreements are processed in an efficient and timely manner

If pressed on overpayments:

• our priority is to support employees and resolve public service pay issues as quickly as possible, including the recovery of overpayments
• recovery of most overpayment balances will not begin until:
  • all of the employee’s outstanding pay transactions have been processed
  • the employee has received 3 consecutive accurate pays
  • the employee has indicated their preferred repayment option
• employees are informed of the amount owing, the cause of the overpayment, and the repayment options
• employees who have already agreed on a repayment plan, but now need to revisit it, can also call the Client Contact Centre to discuss available options
• employees with pay issues continue to have access to emergency salary advance or a priority payment when necessary

If pressed on taxes:

• as for the past 2 years, we have a robust plan to issue accurate tax slips and assist employees with the 2021 tax-filing season
• the year-end tax plan includes thorough testing, dry runs, and communications to the compensation community and employees
• tax slips for 2020 will be released to federal employees on a staggered schedule by the legislated deadline of the end of February 2021

Background

Queue and backlog

In total, as of October 28, 2020, there are approximately 281,000 transactions ready to be processed at the Pay Centre, including 110,000 transactions with financial impact beyond the normal workload.

As of October 28, 2020, the overall queue of transactions waiting to be processed at the Pay Centre has decreased by 56% since its peak in January 2018, representing a reduction of 352,000 transactions (from 633,000 to 281,000).

Over the same period of time, the backlog of transactions with financial implications beyond normal workload has decreased by 71%, representing a reduction of 274,000 transactions (from 384,000 to 110,000).

We observed a slight increase in the number of transactions with financial implications beyond normal workload in August and September 2020, primarily due to seasonal peaks in intake.

The peaks in intake in the months leading to the start and end of summer and the fall usually consists of student and casual hiring, acting appointments, and employees returning from leave. Seasonal peaks are a normal part of the pay administration process.

While we expect the general downward trend of the last two and a half years to continue, the number of transactions processed each month varies based on a variety of factors, such as the complexity of cases, collective agreement implementation and seasonal trends. Large reductions will, at times, be followed by slower progress or even increases.

In 2019, the backlog of transactions with financial implications was reduced by 81,000. So far in 2020, we have reduced the backlog by 92,000.

New retroactive redesign solution

In October 2020, PSPC implemented a new retroactive payment process in the Phoenix pay system.

The retro redesign solution will further automate the processing of individual late transactions, as well as eligible mass retro payments. The new solution is expected to result in more timely payments for employees, and reduced demand for manual work by compensation advisors.

In addition, a new view page is now available in Phoenix, providing employees with more detailed information about their automated retroactive payments.

2021 tax-filing season

The 2020 year-end tax plan includes clear direction on robust testing, completion of dry runs, quality and integrity verification of data, implementation of the tax updates, as well as communication of year-end information to the compensation community and employees. Tax slips for 2020 will be released to federal employees on a staggered schedule by the legislated deadline of the end of February 2021.

PSPC continues to actively work with departments and agencies to communicate with employees who may receive amended tax slips because of outstanding issues with their pay file.

Preparations for the 2018 and 2019 tax years successfully avoided T4 amendments related to Phoenix system issues. As of September 2020, there were approximately 59,000 amended tax slips produced for 2018, and 29,000 amended tax slips produced for 2019, none of which were pay system related. In comparison, approximately 213,000 T4 amendments were issued for 2017.

Under current legislation, the Canada Revenue Agency (CRA) ceased to automatically review amended T4s for 2016 in January 2020. Employees will need to request reassessments, which CRA has agreed to facilitate. Communications for employees were sent and more are being developed.

Overpayments

As the Phoenix pay system cannot segregate true overpayments from administrative overpayments, it is not possible to accurately provide specific figures for true overpayment, which represent money owed to the government.

Administrative overpayments are part of the system’s design and are not a technical issue. They have no impact on employees considering that refunds are automatically generated and netted out in the next pay period. Administrative overpayments are created to ensure employees receive the pay to which they are entitled.

In recognition of challenges due to the backlog, recovery of most overpayment balances will not begin until:

• all of the employee’s outstanding pay transactions have been processed
• the employee has received 3 consecutive accurate pays
• the employee has indicated their preferred repayment option

To note, these flexibilities do not apply to routine operations—for example, leave without pay (LWOP) of 5 consecutive days or less is recovered from first available funds.

In March 2020, the Pay Centre temporarily suspended all new recoveries of overpayments that were eligible for flexible repayment measures, as part of the COVID-19 response.

Starting October 7, 2020, the Pay Centre began recovery of these overpayments that were eligible for recovery and placed on hold.

Underpayments

Employees who have been underpaid can request emergency salary advances or priority payments from their departments.

Unpaid amounts owed to employees can result from regular pay transactions such as overtime and acting pay that are not yet processed or due to errors.

Underpayments are not automatically tracked in the Phoenix pay system because it is impossible to obtain these figures accurately until all backlogged pay related transactions are processed by compensation advisors.

Collective agreement implementation: 2014 and 2018 contracts

With regard to the 2014 round, there are currently 126 TBS and separate employer’s agreements and salary rate updates that have been processed, representing close to $2.5 billion in payments to employees.

To ensure retroactive payment amounts are accurate, PSPC is conducting a manual review of almost 180,000 accounts. This manual work is on track to be completed in fall 2020.

In August 2019, the first of the 2018 round of collective agreements were signed. The implementation of a number of these collective agreements is underway.

Lessons learned from the implementation of the 2014 round of bargaining allowed PSPC to collaborate with departments and agencies, and bargaining agents to simplify processes, improve accuracy of payment and reduce the need for manual work.

We expect that under 10% of the 2018 round of collective agreement transactions will need manual intervention, resulting in a reduction of hundreds of thousands of manual transactions.

In comparison, the 2014 round required compensation advisors to manually process and validate more than 60% of collective agreement transactions.

TBS is responsible for engagement with PSPC, employees and unions on collective agreements and compensation for Phoenix damages.

Phoenix IBM and systems upgrades

Context

This note focuses on vendor support on the Phoenix file (IBM / Innovation challenge) as well as the Phoenix pay system software upgrade (PeopleSoft 9.2).

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 2,500 systems 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 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

If pressed on the invitation to qualify for pay system in-service support / application managed services contract:

• on May 8, 2020, PSPC issued an invitation to qualify for operational support for the pay system
• this procurement process is required to ensure Phoenix is supported after the current contract with IBM ends in March 2022 (if option is exercised)
• an independent fairness monitor was engaged to observe and report on the procurement process to ensure its integrity
• we will continue to ensure employees are supported and that we are well prepared to transition to a new pay system when the time comes

If pressed on the upgrade to the Phoenix system:

• as part of its continued efforts to stabilize the pay system, the department is proceeding with a Phoenix pay system software upgrade from PeopleSoft 9.1 to 9.2
• the upgrade is needed to ensure ongoing vendor support and updates which are required to calculate pay accurately and on time
• we have an extensive implementation plan in place, based on the lessons learned from the Phoenix rollout, so that employees are not affected by this upgrade
• this upgrade, expected to go live in spring 2021, will not affect or require upgrades to the 30+ human resources (HR) systems that feed into Phoenix

Background

Successful pay processing cycles

Since the Phoenix pay system was launched in 2016, PSPC has put in place a number of improvements which have helped move the pay system from “crisis mode” to a much steadier environment. Such improvements include implementing over 2,500 systems enhancements and fixes. As a result, we have significantly improved the accuracy of the system’s regular pay processing.

Since March, PSPC has seen an increase in overall system stability and performance in payroll processing. This means that no major pay issues related to system errors have occurred in that period. However, public servants may still have had pay issues related to data accuracy and timeliness of HR transactions.

IBM contract and amendments

In June 2011, IBM was awarded the contract for the new pay system through an open and transparent bidding process. Since then, there have been 48 amendments to the original contract, for a total contract value of $447 million (taxes included). Amendments are a regular part of the contract management process and were anticipated at the time of contract award.

The most recent amendment was issued in March 2020, and was required to exercise options for software maintenance and to continue support services essential for pay stabilization and PeopleSoft version 9.2.

In service support: Re-procurement

The current application managed service contract with IBM Canada Ltd. will end on March 31, 2021. It has an option year until March 31, 2022, which provides the Government of Canada a transition period towards a future state.

Application managed services is an outcomes-based agreement where the contractor is responsible for delivering services based on our requirements, and ensuring the Government of Canada receives what it needs for a fixed price.

On May 8, 2020, PSPC issued an invitation to qualify (ITQ) on Buyandsell.gc.ca to qualify suppliers interested in providing the application managed services for 24/7 operational (functional and technical) support for pay, once the current contract with IBM Canada Limited ends. An independent fairness monitor has been engaged to observe and report on the procurement process to ensure its integrity.

We will need to rely on Phoenix until we are ready to transition to a new pay system. The backlog of existing pay issues must also be addressed to allow for a smooth transition to any new pay system. This is the main reason why the Government of Canada is still investing in Phoenix—so that employees continue to be supported and to ensure that we are well prepared to transition to a new pay system when the time comes.

Phoenix system upgrade: PeopleSoft 9.2

The upgrade to PeopleSoft 9.2 will ensure that PSPC continues to receive software patches, fixes, and tax rate updates that Phoenix requires to generate payroll accurately.

The PeopleSoft 9.2 upgrade consists of implementing a new version of the PeopleSoft application with limited impact and disruption to operations and users. The scope of the project is limited to the pay system (Phoenix) and does not include upgrading the departmental HR systems. Extensive testing is currently being performed with departments and agencies to ensure that employees’ pay is not impacted when the upgrade is launched.

PSPC estimates that the overall upgrade is expected to take approximately 24 months (including the planning phase) with a target go live in spring 2021.

Innovation challenge: Pay stabilization procurement initiatives

PSPC launched a procurement process in August 2018 to engage the private sector in innovative solutions to help stabilize the pay system. Industry has been consulted in several areas identified as key to reaching stabilization. These are:

• robotic process automation: a contract extension was awarded on November 5, 2020 processes
• lowering the queue: 2 contracts were awarded in May 2019
• improving user experience
• enhanced user access management
• training
• accelerator services: a contract was awarded in February 2020

Robotic process automation

Robotic process automation (RPA) is one of several ongoing initiatives that PSPC is taking to help reduce the backlog and stabilize the pay system. PSPC intends to use RPA services to process manual transactions in the Phoenix pay system. The objective is to allow compensation employees at the Public Service Pay Centre to focus on complex cases and address more transactions in the backlog. PSPC has 2 procurement initiatives underway.

KPMG contract extension for robotic process automation

On November 5, 2020, PSPC awarded a contract extension to KPMG limited liability partnership (LLP) for robotic process automation. Under this contract, KPMG LLP is required to build and deploy robotic process automation services at the Public Service Pay Centre, with target implementation in late November 2020.

Due to delays resulting from the ongoing COVID-19 pandemic, the KPMG LLP contract, which is set to expire on November 16, 2020, is being extended until January 31, 2021. This extension is required to ensure successful project completion and post implementation support.

Robotic process automation: Request for proposal

On October 13, 2020, PSPC issued a new request for proposal (RFP) on Buyandsell.gc.ca under the robotic process automation (RPA) stream of the Pay stabilization procurement initiative.

The RFP was sent to the 10 suppliers that had qualified for the RPA stream through an invitation to qualify launched in October 30, 2019 and set to close on November 19, 2020.

Invitation to qualify: Phoenix pay stabilization challenge (EN920-190988/G)

This new RFP will allow PSPC to build on the work completed under the RPA stream to date, and to accelerate the automation of pay processing. With this new RFP, PSPC is seeking additional resources with expertise in RPA to support all ongoing RPA activities, including knowledge transfer to public servants.

NextGen pilot with the Department of Canadian Heritage

On October 14, 2020 the minister of Digital Government announced the selection of the Department of Canadian Heritage for the first exploratory phase of the next generation HR and pay project. The government will work with the selected vendor (SAP) and the Department of Canadian Heritage to develop a business case, privacy impact assessment, change management and other planning considerations to learn how a future HR and pay solution can integrate information from multiple compensation-related HR systems.

This phase will take place in a test environment and will not affect employee’s current pay. Employees will continue to be paid through the Phoenix pay system while testing is completed. The planning phase begins in October 2020 and future phases will be informed by the results of the planning phase.

Public servants, as well as bargaining agents, have been involved throughout the process and the government is committed to continuing to work with them in the next stages of the project. Long-term work to stabilize the Phoenix pay system will continue.

Update on Phoenix stabilization planning, investments and employee support

Context

This note focuses on the efforts and progress to stabilize the pay system, support employees, as well as financial investments in Phoenix.

Suggested response

• Supporting employees facing pay issues and making sure they are paid accurately and on time is a top priority
• As part of our ongoing efforts we have increased our compensation workforce four-fold since 2016, to more than 2,300 employees
• We have ensured public servants facing pay problems have access to emergency payments
• We have also focused efforts on priority files such as parental leave, disability leave, student pay and collective agreements implementation
• We have introduced MyGCPay to all departments and agencies. MyGCPay is a new web application that provides employees with a centralized and simplified view of their pay and benefits
• We continue to build strong partnerships between departments, unions and all stakeholders so that pay transactions can be processed quickly and accurately

If pressed on specific measures for COVID-19:

• pay services are essential, and we have the resources in place to make sure they are operating without interruption
• the Client Contact Centre (CCC) remains available to assist any current or former public servant experiencing pay issues
• we recognize that the recovery of overpayments can be a source of stress for employees, even more so now given the current circumstances
• employees who have agreed on a repayment plan but now need to revisit it can contact the CCC to discuss available options
• we have introduced interim administrative measures to simplify and speed up the approval process of a range of pay-related transactions

If pressed on support to employees:

• we have launched MyGCPay, a new web application that provides employees with a centralized and simplified view of their pay and benefits. Created by employees for employees, it helps them identify pay issues earlier and allows them to monitor their open cases with more detail
• we have improved services offered by the CCC to provide better support to employees, including the ability to resolve pay issues in a faster and more effective way at the first point of contact
• the CCC escalates cases of hardship so they can be addressed quickly, and agents are trained to respond to situations where employees may be in distress
• across government, progress has been made to increase mental health awareness. Work continues to better equip managers, practitioners and leaders on how to address pay-related mental health issues in the workplace and to inform employees of the services and support tools that are available, including flexible repayment options

Background

COVID-19 measures

Services related to pay are considered essential and measures are in place to ensure that operational requirements are met. Following the recommendation of the Public Health Agency of Canada, PSPC asked all its employees, including those at the Public Service Pay Centre and the CCC, to work from home if possible, while ensuring the delivery of essential services.

The Pay Centre continues to deliver all of its pay services which include regular pay, new hires, return from leave, maternity and parental leave, as well as disability insurance.

Supporting employees and eliminating the backlog remain our top priorities and we continue to see progress.

Since its peak in January 2018, the overall queue of transactions ready to be processed at the Pay Centre has decreased by 56% (from 633,000 to 281,000), as of October 28, 2020.

Over the same period of time, the backlog of transactions with financial implications has decreased by 71%, representing a reduction of 274,000 transactions, from 384,000 to 110,000.

The CCC remains the first point of contact for current and former federal public servants looking for information or help with compensation and benefits, and for technical issues when using the compensation web applications or MyGCPay. Clients may, however, experience increased wait times when calling the CCC.

We are working closely with all our partners, including employees, unions, members of parliament offices, departments and their representatives from human resources (HR) and pay, to provide support during this challenging time.

Total investments to deliver pay and respond to pay issues is $1.381 billion:

• $50 million (2016) PSPC—build capacity, enhance technology, employee support
• $142 million (2017)—build capacity, enhance technology, employee support. This included $15 million for Treasury Board Secretariat (TBS) and $127 million for PSPC
• $431.4 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
• $523.3 million (budget 2019) PSPC—ensure adequate resources to address pay issues; support system improvements
• $9.2 million (budget 2019) CRA—process income tax reassessments needed due to pay issues
• $203.5 million (Supplementary estimates (A) 2020 to 2021)—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

[Redacted]

Since the launch of Phoenix, PSPC implemented a series of measures focused on stabilizing the pay system.

These include increasing the compensation workforce, providing employees with greater support through our CCC, introducing the pay pods model, implementing a backlog reduction strategy through our Strategic Engagement Sector, and implementing technical fixes that have improved payroll processing, such as increased automation of transactions.

As a result, since its peak in January 2018, the Pay Centre's backlog of transactions with financial implications has been reduced by 71% (from 384,000 to 110,000) as of October 28, 2020.

PSPC has also met service standards 71% of the time on average so far this year (as of October 2020), compared to a 57% average over 2018 to 2019.

On average, in 2020 to date, parental and disability leaves have been processed within service standards 99% of the time (as of October 2020).

In addition to efforts underway, we are working closely with all stakeholders, including experts, federal public sector unions and the private sector for innovative solutions to accelerate pay stabilization.

We continue to regularly share information on progress with employees and Canadians through various platforms and tools.

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.

The application allows employees to:

• view the most current information about their pay and benefits
• print important documents such as, tax slips and proof of employment
• identify pay issues earlier and, if an employee’s current or former department was served by the Pay Centre, monitor any open enquiries and cases in detail
• access historical information, pay cheques, benefits plans, enquiries, and Pay Centre cases dating back to 2016

Following consultations with Government of Canada employees, the MyGCPay project team is working on a revised MyGCPay pay stub which is set to launch in fall 2020.

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