Liberals vow to turn page on faulty pay system
In the meantime, the government will spend $1B to fix glitchy payroll system
First, the good news. The Liberal government is ditching the twoyear-old Phoenix pay system that is making life difficult for so many public servants. Well, probably.
In the federal budget released Tuesday, Finance Minister Bill Morneau said the government “is announcing its intention to eventually move away from Phoenix and begin development of the next generation of the federal government’s pay system, one that is better aligned with the complexity of the federal government pay structure.”
The government is also taking steps that recognize the hardships a defective pay system has inflicted on a majority of its nearly 300,000 employees, 40 per cent of whom are based in the capital region. Morneau said the Liberals are talking with public sector unions and other employee representatives to “address numerous grievances and legal actions.”
Equally important, the government said it would amend tax legislation in a manner that would eliminate a major complaint affecting thousands of government employees who have been overpaid in error. Over the past two years, many workers have found themselves in the awkward position of having to refund their gross overpayment and then wait, sometimes months, for Canada Revenue Agency to refund the difference between gross and net pay.
A tax change to eliminate the requirement for gross repayments would not be effective until the 2018 tax year. But in the meantime, the budget documents note, “Public servants in this situation can rest assured that they will not have to start repaying until after the Canada Revenue Agency processes their tax return and refunds the excess withholdings (or credits them against a tax liability).”
Now, the budget’s bad news. It could take the better part of a decade before the Phoenix replacement is up and running. And the tab for trying to fix Phoenix in the meantime — currently estimated at $900 million plus — will likely easily top $1 billion.
We can say this because Morneau unveiled two things of great consequence for his government’s workforce. Both items offer good insight into how long this epic information technology disaster will play out.
First, Morneau earmarked $8 million during each of the next two fiscal years to finance an examination of a new pay system with the help of “experts, federal public sector unions and technology providers.”
Second, the finance minister said the government would contribute an extra $431 million plus over the next six years (ending March 31, 2023) to “continue making progress on Phoenix issues.”
The first item may prove the most important. Assuming the parties make good progress on how a new pay system should be designed, it suggests the Liberals do not expect to begin procurement on the Phoenix replacement until after March 31, 2020.
Even if the government dispenses with the need for a competition to determine who would build it, producing a detailed design for the new system would require another three or four years. Beyond that, project managers would take another couple of years to make sure the new system is properly tested. So, another seven or eight years, assuming no major glitches along the way.
In the meantime, the government is pouring resources into the effort to make the Phoenix pay apparatus as error-free as possible.
“I plan to push it along a lot faster than that,” said Debi Daviau, president of the Professional Institute of Public Service of Canada, in reference to a potential 2025 go-live date for a Phoenix replacement.
“With a focused effort and expedited procurement we could have a new system in a year, before testing and training,” she added.
“We’re two years into this mess. My members need to be able to count on correct pay.”
Prior to Tuesday’s budget, the government had shelled out $460 million beyond what it had originally budgeted, to try to fix Phoenix. At least 90 workers had been added to the main pay processing centre in Miramichi, N.B., bringing the total there to 640. And the Public Services department had hired another 315 employees for a handful of new satellite pay offices that would also serve Miramichi.
Now this total — some 955 employees compared to 550 when Phoenix launched in February 2016 — is to be boosted to more than 1,500 during 2018.
Detail in the budget papers suggests the Liberals could be significantly underestimating future costs of trying to whittle down the current backlog of some 630,000 pay transactions and queries awaiting processing.
For one thing, nearly two-thirds of the extra $431 million for hiring more pay advisers has been allocated for fiscal 2019 (ending March 31). This is a lump sum, which means if the extra effort doesn’t succeed over the next 13 months, the government will be faced with having to shell out significantly more funds in fiscal 2020 and beyond.
Secondly, a Department of Finance official confirmed that the government’s estimates for the costs of fixing Phoenix don’t include the amounts spent, or to be spent, by dozens of federal departments not directly involved with the design, operation or oversight of the egregious pay system.
Last fall, auditor general Michael Ferguson estimated these departments and agencies had spent $60 million by fiscal 2017 and planned to fork over another $140 million by fiscal 2019 in an effort to redress problems caused by the Phoenix system. Ferguson also estimated the departments required another 820 staff — either new hires or employees reallocated from other duties — to be pressed into services to combat the knock-on effects of Phoenix’s pay errors.
An epic information technology disaster. That seems the apt description.