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

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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

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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:

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

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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:

Update on pay stabilization support for employees and investments

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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:

Next generation human resources and pay initiative

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If pressed on contracts:

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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 pay 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.

Document navigation for "Standing Committee on Government Operations and Estimates: November 24, 2022"

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