Proceedings of the Standing Senate Committee on
National Finance
Issue No. 61 - Evidence - March 21, 2018
OTTAWA, Wednesday, March 21, 2018
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to continue its study on such issues as may arise from time to time relating to federal estimates generally, including the public accounts, reports of the Auditor General and government finance (Topic: Phoenix pay problems).
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Welcome to this meeting of the Standing Senate Committee on National Finance.
[English]
My name is Percy Mockler, senator from New Brunswick and chair of the committee. I wish to welcome all of those who are with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, the committee hearings are open to the public and also available online at sencanada.ca.
[Translation]
I would like to ask the senators to introduce themselves.
Senator Moncion: Lucie Moncion from Ontario.
Senator Pratte: André Pratte from Quebec.
[English]
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador
Senator Eaton: Nicky Eaton, Ontario.
[Translation]
The Chair: I would like to introduce the clerk of the committee, Gaëtane Lemay, and our two analysts, Sylvain Fleury and Alex Smith, who team up to support the work of this committee.
[English]
This evening we continue our study on Phoenix pay system problems. During the second part of our meeting this evening, the Minister of Public Services and Procurement Canada will appear, but for the first part we have before us officials from two departments who handle their pay systems in a different manner.
To discuss their respective approaches, we have witnesses from Statistics Canada.
[Translation]
Before I introduce them, I would like to inform you that this is their first appearance before a Senate committee. On behalf of the Senate of Canada, we welcome you and thank you for your time and availability.
[English]
We have Monia Lahaie, Assistant Chief Statistician, Corporate Services, and Chief Financial Officer.
[Translation]
We also have Stacey Money, Director General of Human Resources at Statistics Canada.
[English]
And Martin Chapman, Director, Financial and Administrative Services Division.
Also accompanying the group tonight, the other department is Correctional Service Canada. To you too, we are honoured that you are present with us and you have given us your availability. First, I would like to introduce, from Correctional Service Canada, Nick Fabiano, Acting Assistant Commissioner, Human Resources Management; and John Kearney, Acting Senior Director, HR Modernization and Governance.
Welcome to you all and thank you again for being here with the Finance Committee of the Senate of Canada. I’ve been made aware by the clerk that the first presenter will be Ms. Lahaie, to be followed by Mr. Fabiano. Ms. Lahaie, the floor is yours.
Monia Lahaie, Assistant Chief Statistician, Corporate Services, and Chief Financial Officer, Statistics Canada: Honourable senators, thank you for giving Statistics Canada the opportunity to provide you with an overview of the pay situation at the agency.
I would like to begin by thanking my colleagues, Ms. Money and Mr. Chapman, here with me today, and their respective teams for their dedication to supporting our employees. Most importantly, I wish to thank our employees for their patience and collaboration as we work through pay issues. From the Chief Statistician to front-line supervisors, the entire management team has made it its goal to minimize the impact of the challenges associated with the pay system and to prevent hardship to employees. Ongoing and proactive two-way communication has been instrumental. The organization invested in additional capacity and has maintained collaborative and open relationships with bargaining agents.
[Translation]
I will first provide an overview of our context. Approximately 5,500 public servants work at Statistics Canada, as well as about 2,000 survey interviewers across the country. Our workforce is governed by five unions and 11 collective agreements. Statistics Canada was part of the second wave of the Transformation of Pay Administration Initiative and moved to Phoenix in April 2016.
Because of the unique nature of our workforce and the significant variations in our workload, we are part of a subgroup of six organizations that are not served by the Public Service Pay Centre and are equipped with an electronic interface to transfer data from existing human resources systems to Phoenix. Those organizations are designated as organizations with web services. While our system and our own capabilities allow for some measure of oversight and control, we are not immune to the challenges facing other departments. Let me briefly address this issue.
[English]
First, Statistics Canada retained its regionally distributed compensation adviser teams to process transactions and support employees. These teams have invaluable knowledge of our workforce and pay actions. Second, specialists in six offices were each assigned a portfolio of employees and were equipped with reports to help prioritize and respond to early warning signs. This facilitates proactive communication and action before problems escalate. We have built a culture of collaboration and continuous learning. Third, although to some degree we face the same challenges as other departments in terms of retaining compensation advisers, a regional distribution of expertise and workload has helped reduce staff turnover. Finally, we maintained our in-house system, which includes a user-centric employee portal. As a result, from an interface perspective, the transition was largely transparent to employees and managers who do not process actions directly in Phoenix but use the same portal as before the transition. Only compensation advisers and a few finance employees work with Phoenix on a daily basis.
[Translation]
So the question to ask is: Why do we still have outstanding pay cases? After Phoenix was implemented in April 2016, our compensation advisers, like those in most other departments and agencies, struggled to manage the complexity of the new system. To cope with the increased volume and complexity of operations, Statistics Canada assigned 18 employees to payroll teams, including 15 compensation advisers to the team, which now has a total of 45 employees.
With the help of those resources, the number of employees with an open case has gradually decreased in recent months. According to our most recent report, we have 1,500 employees with an open payroll case to process.
[English]
I will go over some key elements of our approach to manage pay. The collaboration between human resources and finance teams is essential to the production of a comprehensive review of each employee file and to reach a common understanding of the situation. Our comprehensive end-to-end quality control processes include rigorous pre- and post-payment verifications that provide additional assurance to our employees and managers who may not have noticed discrepancies in their pay.
We are using data analytics to make better decisions by implementing a comprehensive and rigorous systematic triage of pay issues. This also helps manage workload, track progress, and proactively communicate and support employees on their individual files.
The complexity of pay issues and the increasing time it was taking to resolve them led us to strengthen our approach to workload management through data analytics. It helped us set priorities for the compensation workload, meet external reporting requirements, and focus our efforts on what would bring the most value and mitigate the greatest risks. We are leveraging new business intelligent technology to integrate key data sets from multiple internal sources to monitor progress and report on pay issues, along with their impact on financial statements and employees.
In closing, Statistics Canada has come a long way in understanding the complexity of its pay activities in this new context, but we still have much work ahead of us. Our processes continue to evolve as we share experiences between departments and collaborate with central agency-led working groups. We believe these efforts will advance our collective understanding and further actions to support HR to pay stabilization.
Thank you again for the opportunity to share our experience with this committee. We would be happy to answer any questions.
The Chair: Thank you. I will recognize Mr. Fabiano to make his presentation, following which we will have questions from senators.
Nick Fabiano, Acting Assistant Commissioner, Human Resources Management, Correctional Service Canada: Good evening, Mr. Chair and honourable members of the committee. While I am still quite new in my role as the Assistant Commissioner for Human Resources for Correctional Service Canada, I am pleased to appear before you on behalf of CSC to discuss the Phoenix pay system. I am joined by John Kearney, our Senior Director of HR Modernization, who has significantly more expertise in the area of our Phoenix pay system.
I would like to emphasize that our organization shares the government’s commitment to address the issues that have resulted from the transition to the Phoenix pay system. Correctional Service Canada continues to work closely with Public Services and Procurement Canada to ensure that our partnership approach to managing pay issues is streamlined and effective. As I am certain you will hear from PSPC officials during the second half of today’s meeting, we all agree that our staff deserve to be compensated accurately and in a timely fashion for the service they deliver to Canadians.
The Chair: Could you go a little slower for translation, please?
Mr. Fabiano: I wrote down here to speak slower as well.
As one of the largest departments in the public service, the Correctional Service Canada employs approximately 18,000 staff members from across the country. Our organization’s workforce includes correctional officers, parole officers, program delivery officers, health professionals, trade professionals such as electricians and plumbers, food services staff, and staff providing corporate and administrative functions at local, regional and national levels. As well, many of these jobs are performed seven days a week, twenty-four hours a day and in operational environments that are very unique. We are proud of the work done by our staff on a daily basis and particularly their dedication in contributing to the safety of communities. We would like to take this opportunity to thank our employees for their patience as we work through these pay issues.
Currently, PSPC has identified that more than 12,000 active Correctional Service Canada employees have open case files at the pay centre, and most of these employees have multiple pay issues identified. The impact on our organization has been significant, and the challenges faced since the implementation of the Phoenix pay problems are numerous. In order to lighten the financial burden on our employees, approximately 100 emergency salary advances and priority payments are issued on a regular two-week basis during pay periods.
Since transitioning to the Phoenix pay system, Correctional Service Canada has implemented a variety of measures to assist and support its employees affected by the pay issues, such as providing regular updates and reference material to employees and tools and training for managers and HR advisers who provide information so they can support their staff. Our employees are encouraged to contact their managers if they notice any deficiencies in their pay. We’ve also expanded our human resource call centre and advisory services to respond to and support the significant number of employee pay issues and inquiries. All of these measures are in addition to those announced by PSPC and the Treasury Board Secretariat.
Correctional Service Canada’s human resource and finance teams have been working with pay centre partners to resolve some of the pay processing challenges. Last November, CSC entered into a service agreement with the Public Services and Procurement Canada pay centre to establish a new Correctional Service Canada pay services unit. This unit is staffed with 37 former Correctional Service Canada compensation employees on term or temporary assignments, as well as existing PSPC centre employees. These new pay centre team members have completed training that will provide compensation advisers access to the Phoenix pay system to take direct entries on employee pay issues. The partnership leverages the department pay knowledge of our former compensation experts with the new Phoenix user expertise of Public Services and Procurement Canada and allows us to jointly focus this group’s pay process and activities on our employees’ priorities in a more effective manner.
This dedicated departmental team will be focused on three objectives: First, correcting employee rates of pay, reactivating their allowance entitlements and ensuring that those corrections continue ongoing; second, piloting a bulk pay processing option for allowances in an effort to have all such unpaid earnings paid to these employees in a single or a series of payments; and third, correcting pay file system information that is holding up the processing of a large number of regular pay and corrective actions already processed.
In the short term, this team’s Phoenix user experience will limit their ability to take on more complex corrective actions. However, as their user experience increases over the coming months, PSPC and CSC believe that they will be able to take on more corrective action and manage more effectively the backlog and regular pay processing challenges that we share.
Once again, CSC recognizes the financial burdens and stresses that pay issues have placed on some of our employees and their families. Our organization is dedicated to providing a workplace where employees are recognized for their work and their dedication, and we are committed to ensuring that they are paid on time and correctly. I want to assure this committee that we are working with PSPC to ensure employee pay issues are being addressed in a timely manner. We share the view that the government recently expressed in Budget 2018 that public servants deserve to be paid properly and on time. The government has also expressed its intention to do everything it can to make it right, and the CSC is working to be part of that solution.
I thank you for the opportunity to appear today and to provide some context to the issues. We would be happy to respond to your questions.
The Chair: Thank you. Before moving to questions, I’d like to have Senator Andreychuk and Senator Neufeld introduce themselves, please.
Senator Andreychuk: I apologize. I came from another meeting. Senator Andreychuk from Saskatchewan.
Senator Neufeld: Richard Neufeld, British Columbia.
The Chair: Thank you.
Senator Marshall: Thank you very much. I’m going to start off with Statistics Canada because your opening remarks were first.
Did I understand correctly that you don’t use Miramichi? I know there are two groups. One group uses Miramichi and there is another group that are doing their own. You’re in the group doing your own, are you?
Ms. Lahaie: Yes.
Senator Marshall: I realize that you are impacted by Phoenix. I’m just trying to get a handle on the logistics of the processes. Perhaps you can start off talking about your transactions. You knew you were going to have a problem. You have a backlog, and you’re starting to try to address what’s in your backlog. Can you give us briefly that process? You have to keep current with things that are coming in, plus you have to address your backlog, so you must have some kind of a system set up to show whether you’re making progress. So the first question is, are you making progress? And if you are, then I’m really interested in your system.
Ms. Lahaie: In our context, we have lately managed to make some progress. In terms of how it works, I will let our DG of HR answer.
Senator Marshall: I would like to know overall. We have been told there are 600,000 outstanding pay transactions, so I would like to get a handle on the numbers at the departmental level.
Stacey Money, Director General, Human Resources, Statistics Canada: Currently at Statistics Canada we have a caseload or an outstanding number of 1,500 employees, so roughly 20 per cent of our department has an outstanding pay issue that needs to be addressed.
You are absolutely correct that tracking this has been challenging. Statistics Canada has the benefit of being a data-intense and rich organization to begin with, so pre-Phoenix we had a process in place to help track our transactions. We have strengthened that since the implementation of Phoenix to particularly look at the pay case volumes. The strength of our system is actually in its — it’s called Power BI. It’s an intelligence tool that allows us to combine not only HR information in terms of numbers of transactions but also the financial association with that — for example, if it’s an overpayment or an underpayment and the magnitude.
The power of being able to put that information together allows us to triage and prioritize the work based on the impact on the individual employees and also the impact on the government from a Statistics Canada perspective. For example, individuals who are underpaid or not paid at all are top priority, and those are the cases that are addressed first, but, through the business process tool we have, it also allows us to identify the large dollar value payments and the payments that are perhaps the longest outstanding so we can triage that based on priority and risk.
With that information, we are tracking that on a regular basis, and we are noticing now that our overall caseload is reducing. The benefit we had was a data-rich environment to begin with and the analytic capacity to react quickly and be able to triage.
Senator Marshall: Did I understand correctly the number? I’ve written down the number you just referenced as 1,500 transactions or 1,500 employees that were impacted.
You’re trying to work now with Phoenix. That’s what you’re trying to do. You’re trying to make it work, and it sounds, from what you’re saying, that you’re making some progress, and I know you have to depend on procurement to fix the system.
Now the government is talking about moving away from Phoenix. How do you feel about that? Based on your experience, would you look forward to the government moving away? Although I’m not quite sure what “moving away” means. Do you think that, over the long term or the medium term, you will be able to make Phoenix work? Or do you think it’s a lost cause?
Ms. Money: We continue a very proactive, collaborative relationship with PSPC, and it’s very positive. We are participating currently in a number of working groups, and we look forward to continuing that support. What we have found in our context that works very well is the collaboration between departments and PSPC. We work very closely, for example, with our web-based partners because we have a similar context in interfacing with Phoenix. Looking forward, for us as web-based departments, we welcome the opportunity to work with PSPC on whatever solution or approaches they may consider. I think that partnership is very important.
Senator Marshall: So for peer departments and organizations that aren’t using Miramichi, that are in a similar situation to yourselves, is your organization seen as fairly progressive and you’re getting it under control? Would you consider yourselves leaders in this now when you look across the spectrum at other organizations, based on what you know and in talking to them?
Ms. Money: From a Statistics Canada perspective — I can only speak for our context. In our context, as you’ve heard, we do still have pay issues that we continue to focus on, and that’s the top priority for our employees. We would certainly welcome the opportunity to continue to work with our web-based partners in working through systems issues or business process issues, as well as with PSPC.
Senator Marshall: Are you having other departments or organizations approaching you and saying, “You’re doing great with what you’re doing. Show us what you’ve been doing. Maybe we can learn from you”?
Ms. Money: We would certainly welcome the opportunity to engage with other departments. Right now, we have been engaging on our data analytic strength, being that is a strength for Statistics Canada in general. We would welcome an opportunity to continue to leverage that expertise internally and to share it with other organizations.
Senator Marshall: Thank you very much. Could you put me down on the second round for Correctional Services? Thank you.
Senator Pratte: I’m not exactly sure who can answer these questions, but I’m trying to understand the difference between your two situations. It’s probably absolutely clear to you how your situations are different, but it’s not exactly clear to me. I understand that in one case you deal with Miramichi. You had lost your pay advisers and this was supposed to be done at Miramichi. In the case of Statistics Canada, you still have your pay advisers. I understand that therefore your pay advisers are only ones dealing with Phoenix, and the managers and employees don’t deal with it. If this is the case, then why do you still have, after progress, 1,500 employees who still have pay problems? Because in theory, with pay advisers having been trained with Phoenix and so on, I would suppose the problems should not be that big. First of all, do I understand correctly the difference between the two situations? Is that it?
Ms. Money: Yes.
Mr. Fabiano: You have it clearly, yes.
[Translation]
Senator Pratte: Why are there so many discrepancies and problems when you still have your pay advisers, and so on?
[English]
Ms. Money: You are right. We do continue to have challenges in our organization. From a Stats Can perspective, we did not experience the same culture change and training learning curve that other departments may have with respect to accessing Phoenix directly, though there are still particular types of transactions we are finding challenging. Right now, at Statistics Canada, our transfers, actings and promotions are some of our top, key issues that we are continuing to manage with Phoenix. From our perspective, we do have an embedded training program and learning and development area for our compensation advisers, and that is helping us as an organization treat pay cases. But the Phoenix system itself is quite complex, so we continue to work directly with PSPC on additional training and support materials and tools to help us understand how the process is working in the system.
Senator Pratte: That’s what I’m getting at. In your case, it’s not an issue of having to train 15,000 employees to deal with a complex system. You have specialists. Compensation advisers are specialists. Therefore, it is an indication of how complex Phoenix is, because you have trained employees who ideally should be able to deal with these issues.
In the case of CSC, one thing that strikes me with this problem is that even after months of the government investing resources, energy and money, there still seems to be very little progress, and apparently it’s the case with you and you’re probably one of the departments most impacted. Why is this so? Why is progress so slow with dealing with this problem?
Mr. Fabiano: I think Senator Marshall indicated you’re working through issues and correcting issues as issues are continuing to grow. In Corrections, we have very complex pay systems. We are covered by numerous collective agreements and very different work processes, so therefore it created issues right from the beginning and resulted in significant pay issues being affected by our staff.
We’ve continued to try and work with Public Services and Procurement Canada to come up with solutions, and we are making progress on some but not on other areas. We are hopeful that the unit that we’ve set up in conjunction with PSPC will be very useful as we will be able to harness the experience of our knowledge of our collective agreements and pay structures and we gain more experience in Phoenix.
One of difficulties is we don’t have access to Phoenix. We have limited access to Phoenix. We have the complexity of the pay allowances and, if somebody works a shift at night versus a shift during the day, weekend in this role, the ability to make all those adjustments. Today, we are making adjustments, communicating them to someone else, and they are making adjustments in the system. We believe that as we get greater access to Phoenix and understand the Phoenix system, we will make some of those adjustments.
Senator Pratte: Does that mean you are going back to having your own compensation advisers?
Mr. Fabiano: It is a bit of a hybrid because these people will be PSPC employees. It is a bit of a hybrid unit. They will not be our compensation advisers. John can provide greater detail about how they’re going to work. It is a bit of a hybrid because it is a pilot for PSPC to determine, with greater knowledge from a department’s complex system, working with the Phoenix people who have the Phoenix expertise, if we can make some progress.
Senator Pratte: Thank you.
Senator Eaton: Listening to both of you and having heard quite a few other witnesses about Phoenix, Ms. Lahaie and Ms. Money, you seem to have things kind of under control, and you have things also for the disaster you were faced with, and the statistics say that the Corrections was one of the worst hit. If you had to do it all over again, what would you do differently? This is not a silly question because I think the government is threatening to move from Phoenix to another system, so what will you have learned, what would your recommendations be and what would you do differently next time?
Mr. Fabiano: Certainly it’s a very difficult question as to, in hindsight, what would have been the best solution. But from a department perspective, but even moving into a central system, the ability to maintain and retain some of our expertise so we can work with the central system.
Senator Eaton: I’m thinking about the next system, and don’t know if this happened the last time. Did Corrections Canada sit down with SoftPay and go through the different ways you pay people? Did you have a lot of input in the program to begin with?
Mr. Fabiano: We did. Evidence has shown — and time is hindsight — that there was not enough consultation and not enough information, but at the time there were opportunities to explain in detail the complex systems we had. With the scope of not only our system but when you compare to the other organizations and their systems, we are second on a list of issues. ESDS has more volume but we have the more complex numbers. For an organization like ours with that many different employees and different pay types, we would have to pay a lot more attention the next time we migrate to another system.
Senator Eaton: Would you train differently?
Mr. Fabiano: Yes, training and maintaining. Training someone else is one thing, but continuing to train about our system —
Senator Eaton: One of things we have heard across the system is that the training was very poor, that managers inside ministries were not trained and employees were not trained. Apparently it is complex because the employee herself or himself has to put in whether they do overtime or maternity leave, and it is a complex system, I gather. Was there enough training on the ground, do you think, with employees?
Mr. Fabiano: John was there during that time so I will allow John to answer that.
John Kearney, Acting Senior Director, HR Modernization and Governance, Correctional Service Canada: One of the challenges that was faced was that users that were assumed to be able to manage the system and input the information had a level of information around the compensation processing that perhaps they didn’t have because there had been a compensation community supporting them in their transaction processing, historically.
Senator Eaton: It was no longer there to support them?
Mr. Kearney: The community was doing the entries for the pay processing in the past. This was a new exercise for employees and managers to do that entry. That part of the change management piece was part of the difficulty. There was user training provided, but it was a matter of gaining the user experience in use of system that was one of the challenges around the capacity of the time ramping up and the learning that would have helped in the process.
The other component in the training element was understanding how the system processed certain types of work, because even our compensation professionals who worked in the system for many years had difficulty understanding some of the sequencing of work they had done before because of the logic in the system and how it is processed. Getting that understanding for users was one the challenges.
One of things we identified in the pilot activities we had undertaken was to ensure new system user experience was paired with our historical compensation knowledge around the different nuances of our pay activities, because that combination of knowledge in the processing of those transactions helped facilitate an understanding around the work that needed to be done. A lot of our backlog issues were as a result of the complexity of the sequencing of different things that were coming into the system, and because the people who did the processing had the knowledge of the premium allowances and the shifts, they could have helped with some of the user development that was going on.
Senator Eaton: In other words, the Phoenix system itself was not user-friendly?
Mr. Kearney: The system had some definite user advantages to it and is user-friendly in a number of ways, depending on what type of transaction you are processing. For example, at CSC, we have a percentage of population where the self-service approach and manager approach and timekeeper was working effectively in processing their regular pay because there are not a lot of changes or different elements of their pay from an extra-duty pay perspective. For anyone that has a shift-worker component or a complexity to the pay, it becomes more difficult for the managers and employees to manage, and that’s where there is transitioning of those transactions to pay centre, and then it becomes a question of whether the pay centre CA has enough familiarity with a CSC-type work environment and entitlements to be able to manage that file easily.
That was the learning curve challenge we had. It is one of the things our partners at PSPC have been working extensively on with us, and that’s where our new pay service unit has helped us bridge that by pairing those people with pay experience around what is a normal thing for a correctional service employee’s pay with the user experience, and it’s helping to improve the processing and helping us manage some of that backlog.
Senator Eaton: Ladies, do you have anything to add to that about what you would do differently next time?
Ms. Money: Yes. There are a couple of points I would like to add from a Statistics Canada perspective.
A couple of things that we found particularly helpful in our context that may be applicable more broadly would be having a very integrated HR and finance team. In our structural organization within Statistics Canada, both the HR and finance functions report directly to Ms. Lahaie. But we developed very early on a close collaboration and understanding of the full pay cycle from a staffing action, for example, all the way to a paycheque. Traditionally, in our perspective, those communities in Statistics Canada may not have worked as closely as they had since Phoenix. I think that’s a real benefit and strength to how we manage pay issues today.
Second, I would mention our quality control processes. We have some that we’ve put in place prepayment, pre-paycheque, that really reduces the opportunity or the chance for human error, for example, as we continue to learn and train. We have peer verification processes in place, as well as dedicated trainers. We have a dedicated training coordinator in Statistics Canada who organizes all information coming in from PSPC or our other partner departments and then makes sure that they dispatch that information to all of our compensation advisers across the country. That’s a prepayment checkpoint.
We also have a post-payment check or verification, as we call it, which basically reconciles the information we have in the internal HR system to the paycheque that was actually cut to the individual. In Statistics Canada’s context, we have found a number of pay issues in that realm that we would have otherwise missed or would have otherwise gone unnoticed.
Senator Eaton: So all those things would be very useful to you as Phoenix dissolves and you move into a new system.
Ms. Money: Absolutely. And it certainly has been very instrumental in managing the pay cases right now. It would have been a significant gap for our understanding of the full range of pay issues that can occur right through from HR to the pay situation.
Just a last point from a Statistics Canada perspective: Given the analysis that we have that provides both an HR component and, for my colleague Mr. Chapman, from financial risk component, the integrated analysis that we’re able to do to triage those cases and minimize the risks to our employees as well as to us and the finances of our organization, for us in Statistics Canada, better data has resulted in better decisions. So I would encourage that opportunity as we go forward as a government.
[Translation]
Senator Moncion: I have just come to the committee, so I may be asking questions that have already been raised.
I worked in the private sector and we had an operational pay system. When we entered information, we knew what the amount of pay would be and when the pay would be issued, because it had to be consolidated and so on.
When we made a transition from our pay system, we did not do so for everyone at the same time. We proceeded in small groups and continued to use the old payroll system in parallel. We did that for about a month to make sure that the transition was going well and that what was integrated could be consolidated.
Can you explain to me how this was done for the Phoenix pay system?
Ms. Lahaie: We worked closely with PSPC to test the interoperability and to prepare ourselves. We received training. We trained our employees. However, when we started, we were part of the second wave, only two months after the first wave. We did not have the opportunity to do parallel testing at that time.
So we had some surprises as to how the system was responding to transactions. Our employees tried to follow the guide, but it did not always work. We then had to provide additional training and work with PSPC to better understand the situation. That’s why we had a backlog. We were also at the peak of our activities at that time. The census was in May 2016 and resulted in the hiring of 2,000 employees who were added to the pay system. That caused additional difficulties with our workload.
Senator Moncion: There was no pilot project with smaller samples for a month or two. Then you see where the hiccups are and correct them as you go before getting everyone involved.
Ms. Lahaie: Our teams worked on developing the pay system interface for almost a year, but I would not be able to comment on why the system responded differently.
Senator Moncion: I understand. You — I’m speaking to both witnesses — also said two extremely important things, including something about interfaces.
On the one hand, you said that you work on the interface, meaning that you integrate your financial information and that’s what you send to the pay system.
On the other hand, you send the information there and they integrate it for you. That’s what I understood and that’s what makes the difference. You, however, have a lot more control over the information, so if it’s the right information, you check the input and output of the information.
But you provided information and you “collected garbage” as the output. It was dysfunctional.
My understanding is that the two of you used two different methods. And having the staff on site, you, on the one hand, were able to handle the situation on a case-by-case basis, whereas on the other hand, if I understand correctly, all your cases had to be managed in Miramichi?
Mr. Fabiano: Yes, that’s how it was at first.
[English]
At the beginning, all the cases were managed out of Miramichi, and most of them continue to be managed out of Miramichi, the resolution issues. We have been able to augment some of our HR service centres and have limited access to Phoenix to be able to resolve some of the issues, but in the beginning it was completely within the pay centre to fix those errors. Again, that was part of some of the frustration and complexity that continued to grow with our staff.
Senator Moncion: Then in both cases, you brought back some staff to help with HR, if I understand correctly, so that you could get some kind of control over what was going on. Associated to this, what is the cost to both your organizations?
Ms. Lahaie: On the Statistics Canada side, we have invested $2.5 million since the beginning — so in the last two years — mainly to pay for additional compensation advisers and some capacity for analytics and finance.
Senator Moncion: So the 17 extra people that you hired.
Ms. Lahaie: Yes.
Senator Moncion: And in your case?
Mr. Fabiano: We were required to submit savings from the Phoenix transition for the last two years of $8 million. We were allowed to keep that savings, and we have reinvested the full $8 million into augmenting some of our current services and hiring additional people in trying to do that. This is limited funding. Prior to that, we were still experiencing expenses because we had to augment. But the savings that were supposed to go to the centre the last two years we’ve been allowed to keep, and we were using that last year and are this next year.
Senator Moncion: How was your pay done before?
Mr. Fabiano: Similar to Stats Canada, we had our own compensation advisers and we had our own system that basically allowed us to determine all of our inputs, and then those inputs produced the paycheques. The paycheques were still produced in a central place, but our system calculated all of that. So we had the ability and more flexibility to go in and correct and adjust on a more regular basis.
In fairness to our PSPC colleagues, transition to centralized systems is not easy when it’s a question of user-friendly. Even for the next system, if it is centralized, we will all be better prepared to deal with it. I think, fundamentally, employees are also missing that person in front of them, but that’s not a reality that we can support in government across all fields. We are better prepared to be able to deal with people from a distance as well.
Senator Andreychuk: My questions are going to be to Correctional Service Canada. You’ve talked about the difference before and the dilemmas you’ve had. You were able to keep the money, $8 million, but obviously it wasn’t enough to correct the problems. I know how important Correctional Service Canada is for our safety, for the rehabilitation, for the entrance of all of the people that we care about. It is one of the most vulnerable services that we have, I think, and the more interfaced with community upon community. I also know what it’s like to live paycheque to paycheque and the stress of the highly emotional, volatile jobs that you are in, the stress on all the employees who have to deal with a difficult situation. Has anyone calculated how many hours we’ve taken away from Correctional Service’s mandate with the interface between staff and management and the worry? You can’t be functional when you’re worried about whether you can pay your rent. That’s a cost we’ve not even dealt with or talked about in this committee, and, to me, it’s the fundamental difficulty. Not only are we disadvantaging our employees, but the services that should be provided by the government aren’t in full capacity.
Mr. Fabiano: Thank you for that commentary. You expressed it well. It is a complex job with a lot of issues. Thankfully, our employees have been very patient and have been very understanding, and I don’t believe, fundamentally, that our mandate has been touched by that because people have continued to work regardless of the pay structures.
We talked about emergency salary advances. We haven’t captured how many hours we’ve spent on that, but our role is to support our staff. Since this has come in, we have issued approximately 10,000 emergency salary advances to about 3,000 employees, and that goes to helping those individuals who are experiencing the pay dilemma. I think we recognized, right at the beginning, that what we can do, in working through this, is to ensure that our employees are taken care of where we can. We’ve really focused on making sure that, if somebody has a pay requirement, we’ve issued an emergency salary advance or priority payment right away. Greater flexibility is coming to us in that way from the government as well, so that’s all good.
I don’t believe we’ve had any incidence of our mandate being dropped, but that is thanks to the professionalism of the staff.
Senator Andreychuk: So 18,000 thousand employees, 12,000 open files; am I correct?
Mr. Fabiano: Yes.
Senator Andreychuk: Is that getting better, or is it about the same?
Mr. Fabiano: Continuing about the same right now.
Senator Andreychuk: So 12,000 people are still with problems and issues over a sustained period of —
Mr. Fabiano: Since the beginning, I guess. As we resolve issues, unfortunately, more issues are developing. For some of them, we have to be understanding. I don’t mean to minimize the impact of the pay. When you talk about those numbers, they come in a range from no pay to “I’ve been acting and I have a pay increment” to “My parking isn’t taken off my pay.” There is a whole gamut. They’re all important, but, again, the variance of the thing. So, again, when we talk about the emergency salary advances, a number of employees haven’t even come forward for their emergency salary advances because I guess they deem that they can manage it, and they’re doing so. But we continue to offer that at all times.
Senator Andreychuk: Or they don’t want to become vulnerable in the association?
Mr. Fabiano: Yes. That is very much a possibility, and I think they’re managing it. But we continue to communicate to our staff that that option is immediately available, as they need it kind of thing.
The Chair: I have just been informed that the minister has arrived, so the chair will recognize two last senators, one question each please.
Senator Neufeld: I will be quick. In response to your response to the last question, when someone was underpaid, you took corrective action and paid them. Was that paid out of the Phoenix system, or was that paid directly from the branch, from Correctional Service Canada?
Mr. Kearney: We would pay it directly from our system.
Senator Neufeld: You’d pay it from your system. Okay.
Senator Cools: I’d like to thank the witnesses for coming before us. My question to you is pretty simple. It may be hard to answer, but the question itself is pretty simple. I’m just wondering: Could you tell us the ratio of inmates of men to women currently in CSC-held institutions? I know there are many of them. I was on the National Parole Board for a period of many years so I was well acquainted with your institutions and that sort of thing.
Mr. Fabiano: The ratio of male inmates to female inmates?
Senator Cools: Yes. How many men are incarcerated and how many women? You’ll be shocked at the ratio.
Mr. Fabiano: I think our latest statistic is that the population is just under 14,000 total inmates, and I believe our women population is around 700.
Senator Cools: That should be a telling thing for us, the ratio of men to women who are incarcerated. Huge. But it’s a social issue that we should deal with one day. I will be leaving the Senate very shortly, but perhaps the Senate could undertake a study because the proportion is disproportionate at every level.
The Chair: To the officials from the two departments, thank you very much for answering our questions.
Honourable senators, to continue our study and our discussions on the Phoenix pay system, we have before us the minister of Public Services and Procurement, the Honourable Carla Qualtrough.
Ms. Qualtrough, thank you very much for accepting our invitation. It’s an opportunity for us to ask you some questions. We’ll ask you to make comments before we go to the question period.
I would like to take this opportunity, Minister, to mention Mr. Les Linklater, who, as your associate deputy minister, has been a remarkable person in assisting the committee to do its job. I also mention the fact that we will be visiting the Miramichi pay centre on May 7, 2018. To both of you, minister and your staff, thank you very much for being here this evening. I will ask you to make your presentation, which will be followed by questions from the senators.
Hon. Carla Qualtrough, P.C., M.P., Minister of Public Services and Procurement: Thank you, everyone, for having me, and thanks for acknowledging the hard work of Mr. Linklater. I do not know what I would do without him and his team. They are fantastic.
To begin, I can assure you that there is no greater priority for me than fixing Phoenix. I’ve said it before and I’ll say it again: It is completely unacceptable that our hard-working public servants are not being paid properly. Every day, I hear stories of hardship, anxiety and stress caused by the failings of our pay system. I hear from and speak regularly with affected public servants from across the country. I read their stories in the news, and I hear regularly from unions about the personal toll it is taking. I hear about the family who had a hard time making ends meet during maternity leave or the parent who had to tighten his belt at Christmas to buy gifts for his children. These stories are heartbreaking, and that is why Phoenix has been my main priority since I have been named Minister of Public Services and Procurement. It will remain as such until our public servants are paid accurately and on time.
Without question, our path forward must be guided by our understanding of the past. In the same vein, we cannot discuss where we are without acknowledging how we get here. I am pleased to hear that your committee will be hearing from Goss Gilroy, IBM and Queensland Health in the coming week. As you engage in these discussions, it must be noticed that PSPC is continuing to work closely with IBM, and there is a strong desire on both sides to get people paid accurately and on time.
As for Goss Gilroy, the review of pay problems notes that the complex job of consolidating and modernizing public service pay was underestimated from the get go, going back a decade. As a result, decisions taken during the earliest stages of planning the transformation of government pay were misguided and failed to consider the vast scope of the undertaking.
When the previous government chose to treat pay modernization as a cost-cutting measure instead of a complex, enterprise-wide business transformation, they exposed this process to significant risk. I look forward to the Auditor General’s second report on Phoenix, which will focus on this very topic. Governance, business processes, technical and human resource capacity and change management were all shortchanged.
[Translation]
Today we see the fallout of ill-informed decisions driven by a focus on cost saving, not employee service. We are righting past mistakes and ensuring that we never again find ourselves in this kind of situation.
When Associate Deputy Minister Les Linklater appeared before you on February 6, he described a suite of measures announced in November to bring the system to a point of stability and, in the short term, reduce wait times and late transactions for missing pay. Informed by Goss Gilroy and the Auditor General’s first report on Phoenix, and validated by the unions, the measures address four key areas: accountable and informed decision-making; improved processes and technology; increased capacity and service; and partnership and engagement.
Mr. Linklater went into each of these areas in some detail. As we have learned, there are no quick fixes, but I do believe these measures are making a difference. We have better governance and oversight — at the highest levels on down. We are engaging in meaningful dialogue with our union partners and appreciate their support. Employees are getting the appropriate training and information.
[English]
I am the first to admit that progress is slow. While the current situation remains very difficult for employees, I want to mention three recent positive developments.
First, since becoming minister, I have put a renewed focus on communicating with employees. We provide monthly updates on our activities and the progress we are making. Our latest update, which was posted on Friday, March 16, showed that between January 24 and February 21, we processed 4,000 more transactions than we received. Staff at the pay centre also processed an additional 5,000 transactions associated with collective agreements. This is the result of increased productivity. This means that the backlog at the Miramichi pay centre did not grow for the first time since last July. We continue to deal with many collective agreement and tax-related transactions so our backlog could still grow, but we expect to see steady declines as we move from spring into summer.
The second development I want to mention is the new funding that we announced in Budget 2018 that will help us build badly needed capacity. To ensure openness and transparency of ongoing costs related to Phoenix, members of the committee have received a document that clearly summarizes the previous government’s expenditures and unrealized savings as well as the funds our government is investing to stabilize the system. I will refer you to this document, which we can certainly provide more detailed information on in the questions.
Budget 2018 proposes investments of $431 million to advance Phoenix solutions. This funding will help us to increase the number of employees at the pay centre and at satellite pay offices to more than 1500. As you know, a critical gap was created when more than 700 compensation positions were cut in 2014. Budget 2018 is filling this gap. In addition to bolstering our compensation capacity, funding is allocated to hire additional HR advisers within departments to assist employees with payroll issues.
Our immediate goal is to stabilize the pay system to ensure pay is being provided accurately and on time. However, we must also look ahead to find a longer-term solution, one that makes better use of modern technology and provides a reliable and efficient pay system for public servants. The budget therefore proposes $16 million in new funding for the Treasury Board of Canada secretariat to work with experts, unions and technology providers in defining a way forward to a new pay system.
[Translation]
The third point I’d like to address is ongoing and additional support to employees. As we rebuild capacity, I want to thank the public service unions for their valuable support for our efforts. We have more than doubled the number of pay advisers since Phoenix was launched, and we continue to seek out new ways to serve our employees better. My department has also partnered with Veterans Affairs Canada to set up new temporary pay offices to process transactions in Charlottetown and Kirkland Lake. From day one, our focus has been on helping employees. Canada’s public service is the best in the world and we appreciate the work employees do every day on behalf of all Canadians. In our client contact centre, we will shortly have 100 people who will have direct access to Phoenix and be able to provide more details to employees’ inquiries about pay problems. This will be a major relief for employees who are desperate to speak with someone who can provide information about their pay.
[English]
In partnership with Treasury Board, we are also providing additional flexibilities and repayment options for the recovery of overpayments, emergency salary advances and priority payments. This will go some distance to address one of the most vexing problems faced by employees — having to pay back money to government while they are still experiencing pay issues. Unless an employee requests otherwise, recoveries will only occur once that person’s pay problems have been fully addressed and he or she has received the correct pay for three consecutive pay periods.
This brings to our most recent initiative to further support Senate and MP offices in assisting constituents experiencing pay issues. This is a second document I will point out. I understand it was emailed to all of you Monday, I believe. On Monday, additional information was sent to you providing guidance on how to manage constituents’ pay issues and send inquiries to the appropriate contact. It’s important to note that pay issues that are reported, whether through the office of an MP or senator, unions, departments, web forms or the call centre are assessed by the pay centre. This builds on existing internal processes, and immediate efforts will be made to resolve issues that have the greatest financial impact for an employee.
Building on these employee supports, we continue to look for ways to ease the burden on public servants while we work as quickly as possible to address their pay issues. I cannot apologize deeply enough to all those who are affected.
I understand members of this committee will be visiting the pay centre in Miramichi in the coming weeks. The employees there, I am very certain, will appreciate your concern on their part, just as I appreciate your interest.
[Translation]
Thank you for your attention. I look forward to your questions. Thank you.
The Chair: Thank you very much, Minister.
[English]
Senator Marshall: Thank you very much, minister, for being here.
I’d like to talk about the funding that was approved in the budget. I notice that you indicated it on the document that you sent to us, the $431 million. Looking at the budget, the bulk of that is going to be spent in the new fiscal year, which starts in a couple of weeks’ time.
Could you provide us — and I don’t expect you to have it there with you, but perhaps you can make a commitment to provide it — with the details of exactly what the $307 million will be spent on? You did mention in your remarks that you would be hiring additional staff, and I think that might make up maybe 90 million of it, but if you could provide us with the details of what exactly it will be spent on, that would be very much appreciated. Could you also commit to provide us with the details of what results you expect to be achieved in 2018-19 with the $431 million? I realize that you wouldn’t necessarily have that information, but if you could make the commitment to provide that?
Ms. Qualtrough: I most certainly can. In fact, Mr. Linklater can give you a bit of a preview of what I will be providing you.
Les Linklater, Associate Deputy Minister, Public Services and Procurement Canada: Certainly. In response to the question, senator, in the next fiscal year, we forecast spending about $158 million on capacity. That would be to maintain and to grow the human resources capacity we have been rebuilding within the network for PSPC.
Senator Marshall: Is there a breakdown of that? I’m curious, and we notice it during other committee meetings, that the amounts provided to the committee are very high level and we’re always looking for a further breakdown.
Mr. Linklater: I can respond to the clerk with more detail.
Senator Marshall: That would be very much appreciated.
Mr. Linklater: The second large element of the funding, about $144 million next year, will be spent on system improvements. That would include our work with the vendor IBM as they transition to take on more of the day-to-day operations associated with pay and more of the risk associated with that.
The third sizeable amount would be the $16 million that the minister alluded to, in part for continuing to provide support to staff through the claims office and other more detailed supports within departments to be able to support interaction with the system.
Senator Marshall: What about the results? What kind of results do you expect? Do you expect the problems to be solved in the new fiscal year? Where do you think you’re headed?
Mr. Linklater: Well, one of the issues, senator, that we have had is we’ve been operating on, I would say, piecemeal funding since Phoenix went live. Budget 2018 does lay out more of a clear path, which gives us the security to be able to continue to hire but also to maintain the capacity, particularly on the HR side, that we have built up over the course the last two years. This will allow us to ensure that we can often indeterminate positions to individuals to come to work within the network as compensation staff and will allow us to more aggressively attack the backlog than might otherwise be the case.
When I was here the first time this calendar year, I spoke to you about our suite of measures and our response to the Auditor General’s report through our management action plan where we have indicated that our goal is to strive towards stability within the system as quickly as possible. These resources, this funding, will allow us to do that.
Senator Marshall: The bulk of the funding is in the new fiscal year, $307 million, so the impression I would read into that is you’re expecting almost all of your problems to be solved in the new fiscal year. What are your performance indicators? Have they been determined? In order to get the money from Treasury Board, you have to say, “Here is exactly what we’re going to achieve with the $307 million.” I would like to know, based on the history where the numbers aren’t going down and problems are continuing, what are your results? What are you expecting to achieve with the $307 million?
Mr. Linklater: We are expecting stability in the queue, as the minister mentioned in her opening remarks, as well as a steady decline once we’re through the collective agreement implementation as well as tax season.
We would think that the progress with the additional resources we’re bringing on, having essentially more than doubled the number of compensation staff — we had it go live to about 1400 now with plans to hire an additional 200 over the course of the coming weeks — we’ll be able to more aggressively attack the queue, which is our key performance indicator at this point.
Senator Marshall: Could I get the details of the performance?
Mr. Linklater: Yes.
Senator Marshall: My last question is to the minister. I know it has been a very difficult couple of years. I know that the numbers are still high with regard to the backlog of transactions. Mr. Linklater has been here; I think this is his third appearance here talking about the strategy. Where the numbers aren’t going down and where the problems are continuing — I know what your strategy is, because Mr. Linklater has been talking about it — but at what point do you reconsider your strategy? How much confidence do you have in what you are doing that it will resolve the problem, and at what point do you say, “We are doing more of the same and we’re not getting good results, so we need to change our strategy”?
Ms. Qualtrough: Part of the reality we face is that we have been in a reactive mode for such a long time. To use an analogy, late last fall, we had our TSN turning point when we started being way more proactive in our approach to resolving this. It felt like, with our action items, we had a way forward.
The biggest shift for making this year, senator, is moving to what we call the “pod model.” At the beginning of this crisis, we were approaching the queue or backlog as well as incoming transactions as a transaction-type horizontal. We are going to deal with all the acting pays, all the disability and all the maternity. The feedback we got was that while it addressed specific problems, it wasn’t treating people as a whole. You might still have six individual transactions where your one transaction had been.
So we’re moving to a pod model, which basically is a team of compensation advisers, administrative assistants and others who are dedicated to a specific department, departments or agencies, depending on the size, who have become experts in the specifics of that department, whether it be the collective agreements, the nuances of how they are paid and when they’re paid or if there’s more of a certain type of lead. If it’s the Coast Guard, you can imagine there are different kinds of transactions than if it’s Elections Canada, for lack of a better example.
We found very promising results having moved two pods in three departments already. We are looking to transition everyone to pods over the course of the coming months. We think that will yield significant results when coupled with our reinvestment in HR capacities within departments. The partners in this crime are HR and pay, and we know that we can’t simply focus on the pay system without acknowledging the HR component of this particular endeavour. So rebuilding HR capacity in departments is a key element, both to stop the bleeding so that there are not the numbers of transactions coming in, but also to address the backlog per department and per person in a more fulsome and rewarding way.
We are going to take Les Linklater’s file and make him whole as opposed to doing one transaction for each of six of you. Unless he has a new transaction next month, which could happen; that’s the reality of this. Our service standard in pay is 80,000 transactions a month, so the expected input and output in any given month is 80,000. Ideally, we want to get the system to a place where we are taking in more or less 80,000 and resolving more or less 80,000. That would be a steady state for us, to the point that — and the numbers while very small— for the first time since July, we actually processed more last month than we took in, which is a minor victory but I’ll take it. It shows that innovations like the pod model are yielding some results.
Mr. Linklater: I can speak to the pod model in more detail. Since December, we have taken three departments, Innovation, Science and Economic Development Canada, Veterans Affairs Canada and the federal Economic Development Agency for southern Ontario, and channelled all of their transactions and backlog to a pod, as the minister described, with employees with various skill levels and abilities. We are seeing that the group in Miramichi who are dedicated to these three departments are building strong and concrete linkages with the HR and finance departments within those three organizations, and the three organizations are getting more direct feedback from the dedicated team in Miramichi. They know who their contacts are and are building those relationships. The three departments who are in the pod are learning from each other so that we can provide feedback from Miramichi to the three departments around certain types of transaction and allow VAC to be able to adopt practices from Innovation and vice versa in a way that allows us to keep current on every transaction that’s come in from those three departments since December. At the same time, it allows staff within the pod to chip away at the collective backlog for those three departments. As the minister said, we are seeing some real progress.
Senator Pratte: Mr. Linklater, you mentioned something — and maybe the minister would have the answer for this. There is an aspect of this transaction between the government and IBM that was just mentioned that I didn’t know about, namely the transfer to IBM of a larger role. It is sort of a public-private partnership, is it?
Ms. Qualtrough: I have personally established quite a strong relationship with the CEO of IBM Canada. We see each other as partners in this endeavour, and we have renegotiated our contract with IBM to transfer more of the risk to IBM.
Mr. Linklater: When the Phoenix project was conceived, the construct, so to speak, for the contract with IBM was based on task authorizations. Those have grown over time, along with the contract value. It meant that PSPC, as the project owner, would say to IBM, “We want you to develop a module to deal with acting pay,” for example, and we would tell them how to do it. IBM would go away, develop the coding and bring us back the module. We would test it and determine whether we would accept it. Once that module was done, we would give them another task, and they would bring that task back to us.
We realized that was not agile or helpful in terms of taking a broader view across the project and managing risk, so in 2016, we worked with IBM to renegotiate the basis for the contract with them on the technical side, whereby we said to them, “We want to move to a managed service arrangement where we will tell you what outcome we want. We won’t tell you how to get there, but we want to make sure you go away and, within certain cost constraints and parameters, come back to us with the result we are looking for, and we’ll accept it or not.”
That has worked very well on the technical side to the point where, late in 2017, in December, we also renegotiated our approach on the functional side to allow movement to managed service where again we are saying, “IBM, we want you to be able to tell us how to better get to an outcome in terms of automation of another transaction.” I’ll take acting as another example. “Go away and figure that out and bring it back to us. We will not tell you how to do it. Here is the outcome we want.” They go away and do it, but that means they take on more risk in doing that because they aren’t given strict parameters. It’s not prescribed. That’s reflected in the costing numbers. The cost for technological support is going up, but at the same time, we are transferring risk and more responsibility to IBM. At the same time, because they are doing that, we are freeing up Crown resources who will now be able to focus on more strategic technical fixes and changes that we will then ask IBM to implement.
Senator Pratte: How is the risk transferred? What is the risk if IBM, for instance, is late in delivering or is —
Mr. Linklater: There are penalties in the contract.
Senator Pratte: Okay.
Ms. Qualtrough: Sorry that I didn’t mention that.
Senator Pratte: So part of the $431 million in Budget 2018 —
Mr. Linklater: Will go toward IBM.
Senator Pratte: Are there future costs? Is that it for this renegotiated contract, or are there future costs that will appear in Budget 2019?
Mr. Linklater: There will be future costs. IBM is under contract with us now for what we call in-service support until June 2019. We have not yet made a decision as who will provide in-service support post-June 2019. Those are deliberations we need to have within government and also with potential vendors. Having gone to the market with a request for information in late 2016, there were very few takers, given the complexity of the system, who put up their hand to say they would be interested in bidding.
Senator Pratte: Is it for up to June 2019?
Mr. Linklater: That’s right.
Senator Pratte: That’s it?
Mr. Linklater: That’s right.
Senator Eaton: To follow on my colleague Senator Pratte, when you say 2019, are you moving away from the Phoenix system into another system, minister?
Ms. Qualtrough: From my perspective at PSPC, I remain laser focused on stabilizing our current system. If we’ve learned anything, we need to take the time to stabilize our current system because we have 300,000 people to pay every two weeks. We can’t just abandon Phoenix, we have to pay people and we need to properly scope any future new system. This system was procured almost 10 years ago, so even if it was working perfectly, we would be looking at new technology and what has developed and how today people and organizations manage pay and integration of other functions like human resources. We are on a parallel track, and that was announced again in Budget 2018, beginning conversations — another thing led by Treasury Board Secretariat — to indeed move away from Phoenix, yes, but, in the meantime, we still have to pay people.
Senator Eaton: You still want to fix Phoenix?
Ms. Qualtrough: We need to stabilize Phoenix. I’m don’t mean to wordsmith, but I think the goal is stabilization, that people are paid every two weeks on time and on budget. Will it remain clunky? It will probably stay clunky until we get a better system, but my goal and my preferred language is stabilization.
Senator Eaton: My last question, which was what I asked of the last witnesses but they obviously don’t have the weight and power you do, is what do you think you have you learned? I know you were kind of handed this basket of worms, but what do you think you have learned so when you approach the new system you will not repeat, or what will you insist on?
Ms. Qualtrough: I’m not sure we have enough time for me to share with you all that I have personally learned from this process piece.
Senator Eaton: What are the top three recommendations?
Ms. Qualtrough: First, the understanding of the complexity of a massive enterprise-wide business transformation, understanding that this wasn’t just about a software program. That needed to be accompanied by sound governance and business processes and changes in policy.
Senator Eaton: Educate me on something: Did each ministry have its own system, or was one system made which each ministry had to use?
Mr. Linklater: There were what we called the regional pay processing system, RPS. If I recall correctly, senator — and we can validate this in writing later — there were five instances that all 100 plus departments fed into, but they weren’t connected to the HR system so it was strictly pay and so there were manual transfers of data between HR and pay.
Ms. Qualtrough: If you’d indulge me, I can’t tell you the number of times a week, as we’re looking at other broader Government of Canada initiatives, I point to somebody and say, “Remember what Goss Gilroy said.” We need to manage this change, and we need to train people properly. The things we’ve learned and the time we’ve taken to understand what could have been done much better I can easily say in my department alone are informing hundreds of my decisions, just having really got to understand the magnitude and complexity of this kind of transformation. I can say personally I certainly have learned a lot, but I know that our departments and teams have certainly learned a lot as well. We do not want to be “Phoenixed” again, to be very clear. It’s now a verb, yes.
[Translation]
Senator Moncion: In your document, you mention that the budget proposes $16 million in new funding for the Treasury Board Secretariat. It works with experts, the unions and technology providers to define a way forward for a new pay system. Your system is flawed right now, and you want to work towards implementing another system eventually. How are you going to transition from an unstable system to another system that is probably unstable if you are not able to run pilot projects that will give you the basic information that will allow you to transition to a system?
Ms. Qualtrough: Absolutely. That’s another lesson we have learned.
[English]
We cannot turn off the lights until we know that it works. We will develop any new system in parallel. We will keep it discrete. We will focus and hopefully will have stabilized the current system because we also need to have good data to transfer to any new system. It needs to be clean. We need to set the new system up the best we can for success.
The other element I can share, having learned that pay systems do not exist in isolation, is that the new system will have to be better integrated with our HR system. This may require a broader investment in HR capacity as well at the systemic level.
[Translation]
Mr. Linklater: Minister, I would like to mention that the Treasury Board is now able to explore and develop longer-term options. This indicates that we must continue to invest in the current system to reach a ceiling or stable state where we will have clear information that can be transferred to another system as it is being developed.
Senator Moncion: In the choice of systems, you mentioned that you used to have a pay system that worked well. You worked with money only. Now you have human resources and payroll, and when you combine the two, it’s a disaster. What is your vision for finding a system on the market that will not lend to the same mess you are currently in?
[English]
Ms. Qualtrough: Again, as I’ve said, we have 32 different HR systems right now across the Government of Canada that integrate differently with Phoenix, some more successfully than others, and some are quite clunky. I don’t know if that’s a technical term but that’s how I’ve come to understand it. We’ve learned from everything that HR and pay are mutually dependent. They don’t exist in isolation, especially in this day and age. As we scope out the next version of a modern HR to pay system in the Government of Canada, both of those elements will have to be addressed.
[Translation]
Mr. Linklater: Payroll is currently a function of transactions or events in human resources. So if you take an acting position or leave without pay, it will have an impact on the salary. As the minister mentioned, if we cannot fix the human resources system before we change the pay system or implement another one, we will probably have another disaster. From the outset, we need to ensure that the human resources process is in line with current practices, that departments have the opportunity to be involved in the human resources process, before we implement another system that will provide real and up-to-date results for employees.
[English]
Ms. Qualtrough: I would add that I envision a time when we don’t talk separately about an HR system and a pay system, but we talk about an HR system, an element of which is pay. If we are five years from now and we are not talking about a pay system, I will be smiling, because we have very much learned that pay is just an element of human resources, as is timekeeping, as is data input. There are other functions, and I apologize, but we’ve really learned their interdependence.
[Translation]
Mr. Linklater: My team is now responsible for stabilizing HR-to-pay. The majority of our work is with the departments and the human resources system to ensure that the human resources interfaces work properly, that the data we receive from Phoenix are up to date and accurate so that we can obtain the results we expect with the pay.
[English]
Senator Andreychuk: I’m a bit confused now because the budget document said, if I understand in French, that Phoenix would be eliminated. In English it said “wound down.” You’re now saying you’re exploring. Which is it?
Ms. Qualtrough: Phoenix will be eliminated through a winding-down process, and I’m not trying to be cheeky here, but at present Treasury Board is exploring how that will happen. Respectfully, I’m not trying to be cheeky. We really ought to get the language tighter, but we have acknowledged that Phoenix is not the system of the future for the Government of Canada. We can’t just turn it off tomorrow. We have to pay people. We learned that it takes time to properly scope a system to meet the needs that we have to scope out now. Phoenix is on the chopping block, but it’s not tomorrow and it could be a couple of years.
Senator Andreychuk: I guess that’s the question. The staff have been living in uncertainty. We, trying to make the system accountable, have lived in uncertainty. Is there a plan in the works that we can get at some point to find out where you are winding down and what alternatives you are looking for? You’ve made it more complex saying you want it to integrate human resources, but to me human resources is much more than the pay. Are you just talking about including the pay portion but you’re going to be expending resources on modernizing human resources? This is getting more and more complex. Where do we get the plan?
Ms. Qualtrough: I might retract my winding-down language. I don’t mean that we’re slowly decommissioning Phoenix. What I mean is there will come a point where we have a modern, reliable pay system running in parallel to our existing system that at some point we will have confidence that we can transition our data over to it and be running. There is no winding down. I apologize. I was being a bit flippant.
Senator Andreychuk: I think that’s what it said in the English budget anyway.
Ms. Qualtrough: It probably shouldn’t have said it that way, but we are moving full steam ahead in stabilizing the system. There will be a period of time when people will be paid every two weeks reliably and accurately and the data will be clean, and then we will transition that to a new system. It would be premature of me now to speculate what that system could look like. It could be cloud-based. It could be proprietary. We could develop it ourselves or use different software integrated with HR. It’s much too soon. This money is going exactly to that exploration.
Senator Andreychuk: I guess that’s the point. If we’re going to have any oversight role, which I think we have to have, we need to know when will this be rolled out. When will we know about it to analyze it, rather than talking about lessons learned?
Ms. Qualtrough: That’s a valid point and we don’t have the information at this time, but I can certainly commit, as we explore, to providing that information. We are just starting this journey.
Senator Andreychuk: The longer you wait and have everyone in flux, I don’t think it’s helpful.
Ms. Qualtrough: Agreed.
Senator Andreychuk: The other part is certainly that this thing has been in development for 10 years or something, but we were told that when the new government came in, the decision was made to go with Phoenix. Why were there not pilot projects? The Auditor General is going to look into that, but why were there not pilot projects? I was involved in one of first attempts at Foreign Affairs years ago. I was a guinea pig in my embassy, and it didn’t work and they shut it down, but they didn’t do it across the board. Lessons learned. Why wouldn’t you have tested it somehow to find out about human resources and that? That’s why I think we need to plan ahead, because some of us asked the very simple questions: how, when, why, and they need to be asked and apparently they weren’t.
Ms. Qualtrough: Two things happened when our government was faced with Phoenix in early 2016. First of all, we were advised by officials that Phoenix was ready to go and so we confidently moved ahead.
The other reality was that it really was not a matter of staying with the existing system or moving to Phoenix. There quite frankly was not an existing system to stay with. We didn’t have people to run the system. The majority of the system had been decommissioned already. Decisions that had been made for the preceding two and a half years meant we didn’t really have a decision to make in the sense of saying, “Let’s put this on hold until we work out all the kinks.” There literally was not a system to go back to.
Coupled with the advice that this was ready to go, a decision was made to move forward by our government. I think it’s fair to say we didn’t appreciate the magnitude of the challenges that would be faced as quickly as perhaps, looking back, we could have, but we got where we got and within six months we were striking new governance, investing new money and we were in this reactive mode as we were being inundated with transactions to the point where we very quickly lost the capacity to keep up, never mind the fact that there was an outstanding number of 40,000 transactions left over from the former system.
As we deal with situation by situation, whether it be implementing collective agreements or tax, we are now faced with the bridge between these two systems. So we implement a four-year retroactive collective agreement that has two years of transactions for an employee in Phoenix and two years archived in the old system for that employee, of which it could have been one of five. It takes a massive amount of human power and resources to process the four-year retroactive pay related to that one person in that one collective agreement.
Consider that there were no collective agreements in place when our government took over. We have put in place 24 of the 27, so over 90 per cent of public servants are again covered by collective agreements, but we have to deal with the hundreds of thousands of transactions that have been created in an already unstable system because of that successful negotiation. It’s challenging.
Senator Andreychuk: You need a plan if you are moving off it.
Senator D. Black: To lead off my questions, I’m wondering whether you are able to provide us a ballpark number as to what amount of money the Government of Canada has incurred to fix this problem. Do you know what that number would be, roughly?
Ms. Qualtrough: I will get Les to read it, because it’s in this chart.
Mr. Linklater: $645 million.
Senator D. Black: I was wondering if that was the number. It’s money that we’ve had to spend because, for whatever reason, we have a mess.
Mr. Linklater: Additional capacity, IT, HR.
Ms. Qualtrough: We have spent $190 million to date, plus the $431 million in this budget, plus the $16 million, plus the $110 million.
Mr. Linklater: Yes.
Senator D. Black: So a little bit of change from $1 billion and we are not done yet. Let’s set aside for the time being that there’s a billion dollars in additional funds.
Where I’m going with this, minister, I would say to you as having been born and raised in Calgary, I know you have the skill set to get this fixed. I’m not sympathetic to the problem you have inherited. But nonetheless I feel that you and your people are taking too much responsibility upon yourselves. Your comments are that you didn’t understand the complexities and we feel we should do better.
I come from the service business. You’ve hired one of the world’s great service firms to implement this project, so I’m not sure why you’re tying yourselves in knots over this. Could we please see a copy of the opinion from the Department of Justice dealing with their view on why we have not sued IBM for, starting with, $647 million?
Ms. Qualtrough: I appreciate your perspective on this. I guess I would not be able to tell you if we can furnish that. I don’t know if it’s solicitor-client privilege. I feel like I’d have to get some advice on that.
Senator D. Black: I think I know the answer.
Ms. Qualtrough: I think I do too, but I would rather be accurate than speculative.
Senator D. Black: I understand that.
Ms. Qualtrough: I am being very deliberate when I say this: We have to appreciate the actual contract that was negotiated with the vendor. It was of a scope that did not include training, that did not include business transformation and that did not include integrating HR and pay systems. What we bought was an off-the-shelf piece of software that had to be massively customized to address 80,000 business process rules related to collective agreements and other specifics to the Government of Canada.
Senator D. Black: Why wouldn’t your independent contractor say, “Minister, this is not the appropriate tool for the task at hand”? That’s why I get so confused. Why didn’t somebody say this dog can’t hunt?
Mr. Linklater: What I have found instructive in this regard is the Goss Gilroy report, where it’s clear that the governance was not appropriate, if I could put it that way, in terms of ensuring a full spectrum of views were brought to bear on the design of the system and the rollout. For example, with the task-based authorization approach with IBM, PSPC, as the project manager at the time, could have done more to invite the views of IBM to the design approach. I think as well, unions could have had a stronger role. The compensation community could have had a stronger role. While we did consult with departments and agencies, in hindsight, I don’t think we did enough consultation and engagement to deal with some of the unique challenges we’re seeing now, in particular shift working and more irregular work patterns that Phoenix as rolled out was not equipped to deal with, with the understanding that there were manual workarounds in place. Not to say that the previous system was great. There were manual workarounds with it. It wasn’t connected to HR in a way that we see now with Phoenix. As we continue to make improvements, we will see a better management tool with the Phoenix platform, however clunky it may be, to the point where it may actually be better than what we had. Our issue is that there were no benchmarks done with RPS, so we don’t know whether we’re performing better in terms of delivering pay than we did with the previous system.
Senator D. Black: Perhaps if we could look at the original contract between the Government of Canada and IBM, we could take our own view on that. I’m speaking not only as a committee member but as a lawyer. You’re assuming too much responsibility upon yourself. Yes, somebody somewhere screwed up. We take that to the bank. That is patently obvious. But I have to think you had a partner in this, and I’m just not so sure that the partner doesn’t bear some responsibility. Maybe I’m wrong, but why do you not undertake to table the agreements with IBM and we can look at it?
Mr. Linklater: We may have to redact it or review it for commercial sensitively, but let us take that back and talk to our Justice colleagues.
Senator D. Black: I’d like to see the opinion from Justice on this. If IBM is able to skate right by this, they are going to be able to say we were only doing what we were told. If they can get away with saying that that they were only doing what they were told, then there is another series of questions.
Ms. Qualtrough: I think you may find yourself down that path.
Senator D. Black: I suspect that’s right, and it’s a path I don’t want to find myself down.
Ms. Qualtrough: An example that comes to top of mind in this exchange of dialogue is the original project was scoped to include retroactivity functionality. That’s a good example. There was a decision made by the previous government to abandon that functionality. As a result, Phoenix does not like retroactive payments, so retroactive payments for the vast majority of cases have to be manually calculated.
Now, imagine employees who don’t have confidence, rightly so, in a system, who are hesitant to input anything that they perceive might disrupt their base salary or otherwise, and so instead of in a timely manner inputting their transactions and acting pay scenario or vacation, they’re holding on and inputting it reluctantly at a later date, thereby creating a retroactive. If they had confidence in the system — and I again reiterate why would they — they could have put it in within the pay period in question and Phoenix would have processed it without challenge because Phoenix actually processes timely transactions to a very high degree of success. It’s the complete opposite with retroactive situations.
Senator D. Black: Over a 10-year period, where was your consultant? This is 10 years. This is not 10 days or 10 months. This is 10 years.
Ms. Qualtrough: I don’t disagree.
Senator D. Black: Thank you very much.
The Chair: In order to follow the comment you heard earlier, minister, can you please verify? We’d like to have the facts.
Ms. Qualtrough: Yes.
The Chair: You can send it to the attention of the clerk.
Senator Neufeld: Thank you, minister, for being here. I know this is a difficult file. Of course, people not getting paid or getting overpaid or underpaid, that’s not something that anybody wants to happen.
Who is in charge of getting Phoenix fixed up? Is it your department? I understand the President of Treasury Board Secretariat is, so I hear that. Clarify for me, where does the buck stop?
Ms. Qualtrough: The buck stops with me. It’s in my mandate letter to stabilize the pay system. The Treasury Board Secretariat president, as the employer, has an integral role, and as the provider of human resource services, also has an integrated role. That’s why, in our governance model now, the way we even speak about this HR pay to integration is by taking that dual responsibility he and I, but fundamentally the buck stops with me.
Senator Neufeld: Thank you.
Secondly, you responded to a question from Senator Andreychuk about why the launch was not delayed. You said it was a system that was ready to go. I have some other information. Internal testing dating back to December 2015 highlighted concerns. The comptroller general released a report January 13, 2016, again identifying concerns. In the same month, your officials had a draft copy from the Gartner report calling for a contingency plan and a need for a parallel system. CRA said test results are unknown. ESDC said they had questions about it. CFIA was the same, RCMP, Public Safety. To me, there were lots of things happening in January of 2016 that said there are some problems here and maybe we should actually review it a little bit. You said you came in and were told it was a system ready to go. Who told you it was a system ready to go?
Ms. Qualtrough: I apologize. It wasn’t me personally. My understanding is my predecessor was briefed by senior officials that it was ready to go and that departments had signed off on it. That information was provided at house committee by the deputy minister. There is testimony to that effect. The information we were receiving at the ministerial level was that this was ready to go.
Senator Neufeld: Can you provide to the clerk the department heads that wrote so we can see the dates of when they wrote and said the system was ready to go? I have stuff that dates back to January 2016 that didn’t say no you shouldn’t go, but there were lots of problems. I would like to see who said it was okay. Who told you that?
Ms. Qualtrough: There is a publicly tabled document that was provided to my predecessor where departments were indicating their readiness to go on Phoenix, and we can certainly provide you with that information.
Senator Neufeld: I guess it’s the same department heads that are telling you today it’s a mess. It would be interesting for me actually to see that. If you can provide it through the clerk, I’d appreciate it.
Some of the other questions I had were answered, but maybe you could tell me, what is the dollar amount to date of overpayments to employees?
Mr. Linklater: Just bear with me senator. We do have an OPQ here. Tabled in the house today as an Order Paper Question — and we can provide this to the clerk as well — for 2016, the total of overpayments globally was $106 million: $23 million were overpayments from the old regional pay system and $83.5 million were overpayments in Phoenix. In 2017, the total is $246 million in overpayments, of which $141 million were new overpayments for 2017.
Senator Neufeld: Can you tell me what the underpayments were for the same periods of time?
Mr. Linklater: I don’t have that information, but I can see what I can provide.
Senator Neufeld: If you could provide that.
The second question is, do you anticipate that you will get all the underpaid paid out, and in what time frame? Will you collect the overpayments, and in what time frame?
Ms. Qualtrough: What we have committed to is not collecting anything until an individual employee has been made whole. So whether it’s an underpayment or an overpayment owed to them, until all the transactions pertaining to an individual employee have been addressed, and until that employee has had three consistent and accurate pay periods, we will not begin to have discussions with employees about any money, as a result, to be recovered. When those discussions happen, we will ensure the most flexible of repayment schedules that you can imagine.
I assume you’re asking when all the transactions in the queue with financial impact will have been addressed. I can’t give you an answer to that, sir. I’ve learned that this file is way too unpredictable. What I’m looking for currently is consistent and predictable progress within the file. I’m not prepared to say we’re there yet because we had one successful period where the number went down. It would be irresponsible of me today to commit to a timeline.
Senator Neufeld: For 2016, when there was $106,109,000 in overpayments, has any of that been collected, or was this decision made just recently not to collect anything or try to get any of the underpayments completed?
Mr. Linklater: Some of that funding, senator, would have been recovered. There are defaults in the system. We did have arrangements with various individuals who had overpayments from 2016 who are now in repayment plans, so we are actively recovering a portion of that money.
Senator Neufeld: A portion of that $106 million. Thank you.
Senator Marshall: Minister, I appreciate your commitment to provide a detailed breakdown of the $431 million due money and the performance indicators, but there is one thing in the budget document that puzzled me. I don’t know if you can answer it right off the top of your head. The commitment was for $431 million, but when you go to the schedule for the five years, it only adds up to $330 million. I am wondering where the other $100 million is going.
Mr. Linklater: That’s in-year money for the current fiscal year. You’ll recall that the minister’s working group announced in May that $142 million was being made available, so $80 million of that is 2017-18.
Senator Marshall: Thank you very much. I look forward to the additional information.
Mr. Linklater: You’re welcome.
The Chair: Minister, thank you very much for your attendance with us this evening.
Mr. Linklater, I can take you as an example. When we asked for additional information through the clerk, you were the first to bring it to our attention in the following 72 hours, rather than months — and still waiting — from certain other departments.
With that, we thank you both.
(The committee adjourned.)