Federal government to test expanded use of AI to resolve payroll problems

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The federal government has been using artificial intelligence to automate pay processing for more than three years. However, a pilot project planned for this fall will expand the government’s use of the technology as federal compensation agents will draw from AI’s guidance, questions and calculations to process transactions.

The problem-ridden Phoenix pay system was launched in 2016 after being introduced in 2009. While it was intended to save the government $70 million by consolidating pay systems across departments, it has since cost more than $2.2 billion.

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Issues related to Phoenix began to appear almost immediately after its implementation, leading to errors on employees’ paycheques and a backlog of pay transactions. Eight years later, public servants continue to be affected by the system, many of them dealing with underpayments or overpayments.

A backlog of 425,000 transactions

According to the Public Service Pay Centre dashboard, there were 425,000 transactions ready to be processed for client departments and agencies as of April 24. Of those, 111,000 were considered within service standard, while another 101,000 transactions were outside service standard, but less than a year old, and 213,000 were more than a year old.

Michèle LaRose, a spokesperson for Public Services and Procurement Canada, said in an email in April that process automation — a technology that uses computer software to complete simple and highly repetitive transactions — had contributed to the processing of more than 120,000 transactions since November 2020.

“We are exploring ways in which AI can contribute to pay processing and expect to implement these in the near future,” LaRose said, adding that PSPC was also using automation to help with tasks like processing retroactive payments outlined in new collective agreements and leave-without-pay entries, which used to be processed manually by compensation advisors. “Currently, we are using robotics to automate highly repetitive manual pay transactions to increase efficiency and accuracy in pay processing.”

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LaRose said the department was working on leveraging AI to “help compensation agents process transactions more quickly and to reduce potential errors.”

“AI has many capabilities, including the potential to provide real time, step-by-step guidance to agents, answer questions and make calculations based on information in collective agreements or government HR policies,” LaRose said. “It will reduce the number of manual interventions required for certain transactions, which will help agents focus on more complex aspects of transactions.”

LaRose said testing of AI to support agents had “yielded positive results,” which PSPC would build on in a pilot project set to begin in the fall.

‘I have no trust’

Karine Hanna, a public servant working for the Department of National Defence, said she had faced problems with Phoenix since its implementation in 2016.

“It’s been a long journey that’s still ongoing,” said Hanna, who was rear-ended by a bus while she was on her motorcycle in June 2016. “I took all my sick days, and then I started leave without pay from July until September.”

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Upon her return to work, Hanna said she reached out to compensation advisers to find out how much money she owed. In April 2017, she received an amount of just over $4,000, which she agreed to, opting to pay via biweekly deductions.

“You would think when you enter a contract of repayment that (the deductions) would start. That was not the case. They deducted amounts here and there whenever they wanted,” said Hanna, who has been subject to re-calculations that she has objected to and is now being told she owes the government $15,000. “Although I’ve asked for them to cease deducting, they are not listening.

“This has caused tremendous stress to my family, my children and my health.”

Hanna said she had contacted her member of Parliament, has been in touch with PSPC and has filed a grievance. She said she hadn’t received accurate T4 tax forms and had been told her original repayment contract was cancelled, adding she had no idea when the “arbitrary clawbacks” would end.

“This could be going on forever,” Hanna said, noting that the amount she owed continued to rise, though she had been told by a lawyer that she was actually owed money due to underpayments. “I have no trust in this Phoenix. I don’t trust the employees that are there. I completely lost faith in ever getting paid properly.”

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Exploring a system to replace Phoenix

According to LaRose, the government has spent $154 million since 2018 looking into a new platform to replace Phoenix and had awarded Dayforce a contract to “test the viability” of its system. PSPC spokesperson Jeremy Link said that contract had reached a value of $71.7 million.

The 2024 federal budget allocated $135 million in 2024-25 for PSPC and the Treasury Board of Canada Secretariat to “improve public service human resources and pay systems, including continuing work on a potential next generation pay solution.”

LaRose said final recommendations, an implementation strategy and cost estimates were expected in 2024-2025, which would assist the government in making “an informed decision regarding the path forward for HR and pay.” The government plans to resolve all employees’ existing pay problems before transferring their files to a new system.

Though no new funding was announced in the budget to address backlogged transactions, Link said PSPC would “continue to work on administering and improving pay operations” using multi-year funding provided in the previous budget. He said the department would continue processing the most critical transactions first, such as cases of disability management, severance pay and parental leave.

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LaRose said AI would be of use even with a new system.

“Artificial intelligence would be used to assist compensation advisors in their daily work,” she said. “It could help automate certain aspects of their work and provide them with real-time accurate information from various collective agreements and HR policies.”

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