Switch from Phoenix to new pay system will take years, federal official says

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The federal government is making progress in adopting a new human resources and pay software to replace the broken Phoenix pay system. The senior government official behind the transition, however, says the process will likely take years.

In a Tuesday afternoon webcast open to the public, Public Services and Procurement Canada (PSPC) associate deputy minister Alex Benay said the transformation wouldn’t happen overnight.

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“We’re talking about three to five, six years worth of work to get to an end state,” said Benay, who noted the current system was not fit for purpose. “We will be with the current system for quite a while.”

The problem-ridden Phoenix pay system was launched in 2016 after being initially introduced in 2009. While it was intended to save the government $70 million by consolidating pay systems across departments, it has since cost $3.5 billion.

Issues related to Phoenix began to appear almost immediately after its implementation and continue eight years later, leading to errors on employees’ paycheques and a backlog of transactions, including those for public servants extending contracts or acting positions, taking leave or making changes to personal information.

As of June 19, there were 416,000 transactions ready to be processed, with half of that total received more than a year ago.

Amid ongoing issues with Phoenix, the government has spent over $150 million since 2018 looking into a new platform to replace it. A February 2024 report with results of initial testing found that Dayforce was a “viable option” for the next HR and pay system.

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Now, Benay says, the plan is to ensure it’s feasible to roll out.

Noting that the government was “committed to transparency,” Benay said he planned to provide regular updates on progress, with the next session set for this fall. He said the government would also launch a new website featuring a progress timeline.

During a news conference later on Tuesday, Benay said a review of external and internal reports found that root causes of the Phoenix debacle included its separate systems for human resources and pay, a lack of centralized data and an inability to adapt the program to meet the government’s specific needs, leading to a high level of required manual intervention at the pay centre.

“A new HR and pay system would replace most of the 30 HR systems in use across government,” said Benay, who also held conversations Tuesday with PSPC employees and unions.

According to the government, user awareness sessions this fall will allow public servants to try out the Dayforce system and provide feedback.

Benay said the government was considering rolling out the Dayforce system in departments where the backlog from Phoenix had already been eliminated.

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On Tuesday, PSPC also launched its first quarterly progress report on an “integrated strategy for human resources and pay.”

It outlined that $963.3 million would be spent in the 2024-25 fiscal year to maintain and improve the current pay system and operations while exploring replacement options, developing artificial intelligence solutions and experimenting with data management models.

Major expenses include $350.3 million for the pay centre and its compensation advisors to “handle pay and benefit transactions for over 250,000 employees, as well as reduce outstanding transactions,” $234.6 million for pay applications and IT support — with $120.2 million for a contract with IBM Canada — and $85 million for Dayforce to expand testing and configuring the system.

Benay told reporters that “we will be looking at a world where we are running both Phoenix and Dayforce in the future.” He said the government would have to continue managing that cost, adding the flip side would be a “big bang deployment” that was not recommended, given mistakes made during the rollout of the Phoenix system.

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A fully-costed plan for Dayforce, should it prove to be successful, is expected by the end of 2024.

Benay said the government had also identified 112,000 complex backlog transactions, which it aimed to process by March 2025, and was launching a pilot project using artificial intelligence to support compensation advisors’ work.

“This is the year where we are building Dayforce as a replacement system for HR and pay and determining if it is a feasible solution for the Government of Canada,” Benay said. “The pay centre folks in Miramichi and other folks across the country that work in the pay centre are directly involved in designing this thing, and, frankly, personally, I won’t sign off on deploying it unless they’re happy.”

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