Public Accounts Committee on May 6th, 2026

[The Chair, Conservative, John Williamson]

Good day, everyone.

Let's get things started right away—apologies for the votes in the House of Commons.

I call this meeting to order.

Welcome to meeting number 38 of the House of Commons Standing Committee on Public Accounts.

Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. Members are attending in person in the room and possibly remotely using the Zoom application.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, March 23, 2026, the committee commenced consideration of the report on “Modernizing the Pay System”, of the 2026 spring reports of the Auditor General of Canada.

I'd like to welcome all of our witnesses.

From the Office of the Auditor General, we have Karen Hogan, who's the Auditor General of Canada. Jean Goulet is joining her, along with Jocelyn Matthews. It's nice to see you all in today.

From the Department of Public Works and Government Services, we have Arianne Reza, deputy minister—nice to have you back—along with Kim Steele, assistant deputy minister. From the Treasury Board Secretariat, we have Jacqueline Bogden, chief human resources officer; and Vidya ShankarNarayan, senior assistant deputy minister, people and culture, office of the chief human resources officer.

There will be a few opening statements.

Ms. Hogan, we'll begin with you for approximately five minutes, please.

[Karen Hogan, Auditor General of Canada, Office of the Auditor General]

Thank you, Mr. Chair.

Mr. Chair, thank you for the opportunity to appear before the committee to discuss our report on modernizing the federal government's pay system, which was tabled this past March.

I would like to begin by recognizing that we are meeting on the traditional, unceded territory of the Algonquin Anishinabe people.

In 2016, the government launched the Phoenix pay system and centralized pay services for 46 departments and agencies. The underpayments, overpayments and delays in receiving pay experienced by many federal public servants have been well documented.

This audit focused on the human resources and pay transformation project, which aims to replace Phoenix and 30 human resources systems with a single integrated system called Dayforce. The Treasury Board of Canada Secretariat and Public Services and Procurement Canada have important roles in delivering this project, which is currently estimated to cost approximately $4.2 billion.

Overall, we found that both organizations were managing the project to ensure that public servants' pay will be accurate and on time once the new Dayforce system is launched. While the audit identified three key risks, the secretariat and the department have an opportunity to address them because the project is still in its planning phase.

First, following the implementation of the Phoenix pay system, several lessons learned were identified. Among those was the need to simplify and standardize pay rules and processes before launching a new system to avoid costly and complex customizations. We found that the Treasury Board of Canada Secretariat's progress on simplifying pay rules has been slow. As a result, Public Services and Procurement Canada is customizing Dayforce to work without simplified pay rules, at an estimated additional cost of almost $4 million per year.

Second, although there has been progress in clearing the backlog of requests to fix public servants’ pay issues for the first two departments transitioning to Dayforce, progress in addressing the overall backlog has been limited. As of September 2025, more than 233,000 pay transactions remained unresolved, affecting over 133,000 public servants served by the Miramichi pay centre. If these errors are not cleared before the launch of Dayforce, there is a risk that they could be transferred into the new system, which would undermine its effectiveness from the start.

Third, in January 2026, Public Services and Procurement Canada cut three years from the schedule to complete the pay transformation project. This is intended in part to mitigate the cost and complexities of operating two pay systems in parallel for several years. However, it significantly shortens the time available to fix existing issues and prepare departments for the transition. It will be important for the department to regularly monitor and mitigate risks that could be caused by the shortened project schedule.

Mr. Chair, this concludes my opening remarks. We'd be pleased to answer any questions committee members may have.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you, Auditor General. I appreciate that.

We're turning now to Ms. Reza.

You have approximately five minutes.

[Arianne Reza, Deputy Minister, Department of Public Works and Government Services]

Thank you, Mr. Chair.

I'm joined today by my colleague Kim Steele, assistant deputy minister of the human capital management solutions branch.

We are here today to discuss the recommendations of the Auditor General in her recent report on pay modernization.

Mr. Chair, regarding the current pay system, its journey and history are well known—from the early days of promise to a middle period of error, and then the recent, more positive changes to address the backlog of cases and replace Phoenix with a more reliable and effective system that encompasses HR and pay functions.

In the early 2000s, the federal government was facing considerable pressures related to pay. At that time, the government was working with an aging and failing pay system as well as a compensation adviser community that was experiencing substantial turnover across a number of departments.

To address these issues, in 2009, the government launched the transformation of pay initiative. The initiative entailed two main projects: first, pay modernization to replace the 40-year-old existing system with a commercial off-the-shelf option; and second, pay consolidation that would transfer the pay services of individual departments to a single pay centre. By 2012, the new pay centre was up and running in Miramichi, New Brunswick, transferring the pay services of 46 departments to a smaller, more consolidated team.

Changing the service delivery model at the same time as we implemented a new system was, at that time, a massive undertaking. Ultimately, it was the underestimation of doing both transformations at once that led to failure.

As the Phoenix system took hold, an array of challenges quickly emerged, including issues around overtime, shift work, acting pay and employee transfers from one department to another.

PSPC took action, working with the Treasury Board of Canada Secretariat and other departments and agencies, to resolve outstanding pay requests and develop an HR-to-pay integrated plan to standardize business processes.

From the outset, PSPC has not relented in its effort to identify, address and eliminate pay disruptions, and we have taken several steps to improve the situation. These include hiring and training additional compensation advisers, expanding client support services, enabling priority and emergency salary advances, and introducing bulk processing. We have also improved automation and AI-enabled supports to reduce manual workloads and accelerate processing.

Mr. Chair, we've come a long way.

Today, we are here to assure the committee that PSPC is on track to implement a new pay solution that will better serve our hard-working public servants and meet the expectations of Canadian taxpayers.

In the last few years, as a result of targeted investments, operational reforms and enhanced tools, the total number of outstanding pay transactions has decreased by 66% since its peak in January 2018—a reduction of 412,000 transactions. Pay accuracy has also steadily improved, reaching an average of 98.6% as of this date.

At the same time, PSPC is focused on delivering a long-term solution that will improve data quality at the source, streamline processes and reduce the risk of errors. In May 2025, following extensive research, testing and a feasibility assessment, the government confirmed that Dayforce will replace Phoenix and more than 30 existing HR systems.

The approach being used is grounded in lessons learned, including strengthened governance, robust engagement with departments and bargaining agents, phased implementation and full transparency.

As we work toward these goals, external oversight is critical. I want to sincerely thank the Auditor General and her team for the recent study on pay modernization.

PSPC agrees with the Auditor General's recommendations that we must improve our approach to eliminating the backlog, work with the Treasury Board Secretariat to address gaps in service standards and, finally, develop key performance indicators that measure whether costs to process pay transactions with Dayforce will decrease compared with those of Phoenix. Our actions and planning will help reduce the backlog, bring greater predictability and uniformity to the new pay solution, and ensure accurate and transparent costing throughout.

We recognize that there have been real consequences for public servants and their families over the years. PSPC will continue to address those impacts with care, urgency and accountability.

Thank you, and I look forward to your questions.

[The Chair, Conservative, John Williamson]

Thank you very much.

Ms. Bogden, you have about five minutes, please.

[Jacqueline Bogden, Chief Human Resources Officer, Treasury Board Secretariat]

Thank you very much, Mr. Chair.

I’m accompanied today by Vidya ShankarNarayan, our senior assistant deputy minister within the office of the chief human resources officer.

Mr. Chair, the Treasury Board Secretariat welcomes the Auditor General’s recommendations on the modernization of the pay system.

The findings in the report support the government's ongoing efforts to ensure that federal public servants are paid accurately and on time for their work.

As the lead for human resources for the core public administration, TBS sets policy and provides leadership and guidance on HR tools and systems. As such, we provide oversight and support for the human resources and pay transformation project, complementing PSPC's efforts to transition to a new pay system.

My office—the office of the chief human resources officer—works on a range of initiatives to simplify HR and pay to reduce pay and processing errors and delays, as well as the administrative burden for departments.

One of our goals is to simplify pay rules to reduce manual interventions at the pay centre now and potentially reduce the need to customize the future HR and pay system.

The Treasury Board Secretariat acknowledges that a significant portion of this work relates to conditions of employment that are negotiated with the 17 bargaining agents that represent employees in 28 different collective agreements.

This means that the public service has to administer thousands of pay rules, and most of them are embedded in collective agreements. In these instances, pay simplification requires the agreement of bargaining agents.

We have made some good progress in the previous rounds of collective bargaining, and we continue this work with bargaining agents towards additional pay simplification solutions. These changes are in addition to the many pay simplification outcomes that we have generated through policy and business processes changes under our own policy authorities, and we take that work seriously.

We are also leading efforts to standardize how HR and pay is delivered across departments and agencies to both optimize these operations and better prepare us for a transition to a future HR and pay operating environment. This includes, but is not limited to, working in close collaboration with PSPC to reduce the number of HR systems and improve oversight of any further customization or investment in legacy HR systems.

We're also working to support readiness for the transition from Phoenix to Dayforce, such as providing standardized HR and pay training to help managers and employees better understand and deliver on their HR and pay responsibilities.

Finally, I would like to acknowledge the Auditor General’s recommendation that Treasury Board, in coordination with PSPC, address gaps in service standards for pay transactions.

We fully agree with this recommendation and have already started this important work to improve how we monitor performance.

While not related to the audit report, I do want to acknowledge the challenges that many employees have faced, either directly or indirectly, from the implementation of the Phoenix pay system.

Our priority continues to be to ensure that employees are paid accurately and on time while building a sustainable, long-term solution.

This concludes my remarks, Mr. Chair. I would now be pleased to answer questions.

[The Chair, Conservative, John Williamson]

Thank you very much.

We'll begin the first round. Three members will each have six minutes.

Ms. Kusie, you'll start us off, please.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Chair.

Thank you to our witnesses for being here today.

Madam Auditor General, your report shows that despite a decade passing since the failed implementation of the Phoenix pay system, which, as you noted at the conclusion of your audit, had pay backlogs affecting more than 133,000 federal public servants, the government still hasn't properly addressed the key issues at the heart of the Phoenix fiasco.

Why do you think this is so?

[Karen Hogan]

I'm often asked this question. I think it's great that you have two of the key players in terms of the other witnesses here today so that you can ask them that.

I do recognize that simplifying payrolls, which was one of the things identified early on by my office as well as independent companies that have supported the government in analyzing what happened with the transition to the Phoenix pay system, requires collaboration and coordination with many partners. I think everyone—unions as well as the government—is in agreement that paying people accurately and on time is everyone's ultimate goal, and I hope they'll find a way to simplify payroll soon.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Your audit states that the Treasury Board of Canada Secretariat made slow progress in simplifying the rules, meaning that delays and slow implementation from TBS were forcing the government to spend more annually on the new system.

Do you believe that the minimum cost estimate of $4.2 billion for the new Dayforce system is accurate?

[Karen Hogan]

One thing that we highlighted in our audit is that we felt that this cost estimate is missing a really key element, which is the cost that it will take for departments and agencies to transition. It is a rough estimate right now. It is preliminary, and I know that it's being worked on to be a little more accurate and more comprehensive.

When a central system is changed, every organization that uses that system has an associated cost that comes with it. That's one element that's not being thought of here. This is really the cost of changing the box and the transitions within the two organizations that we audited. I think it's important to recognize that some of our previous work highlighted that many departments and agencies say they are slow to modernize, or choose not to modernize, because they don't know how to find the funding or have the resources to do it.

Here's an opportunity for the public service to really take a step back and think globally. They should, in my opinion, factor in the costs of all departments and agencies to transition in addition to the costs that are already in the estimate.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

There will be additional annual costs of at least $4 million to customize cloud extensions to accommodate the government pay rules. In your audit, did you find if the department knew if these annual costs would be in place for the lifetime of the Dayforce system?

[Karen Hogan]

That additional $4 million per year for the customization is factored into the preliminary costs that are already there. I think it stands to reason that it's there because rules had not been simplified, and some customization was necessary. Until the rules are simplified, those costs are going to be there. I think that would be an easy presumption to make.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Madam Reza, welcome back to public accounts.

The report states that your multi-billion-dollar estimate for the Dayforce system did not include important costs needed for all departments and agencies to transition to the new system. Why is that?

[Arianne Reza]

I think that the cost we're looking at right now is in flight. We have a contract with Dayforce for, I think, about $360 million. As you know, we're shifting from a separate HR system and a separate pay system to integrating them. As we're rolling it out to enterprise, we're going to look at it through waves. As you noted in the report, we have to understand the enterprise cost of coming on board. Right now, we're looking at different models and different approaches to ensure that we don't repeat the mistakes and errors that we have already lived in previous generations.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Minister Lightbound has announced that the new system will be onboarded three years ahead of schedule. Does the change in schedule alter the cost of the project?

[Arianne Reza]

I think that the approach to the three years is because we had anticipated running both Phoenix and Dayforce concurrently so that we would have a backstop instead of switching over from one to the other, but there are costs involved in keeping two systems running from HR, the IT expertise and monitoring. What we're trying to do is reduce the dependency, to keep two systems up and running for a period of time that's still being defined, and then reduce it so we don't have a continued cost to bear.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

You say that transitioning to the Dayforce system will lower the cost by operating one system at a time. If pay errors still exist in the Phoenix system at the time of transition or if one organization is delayed in moving to the new Dayforce system, how much do you estimate it will cost to run both systems at once?

[Arianne Reza]

We're still working out what that looks like, because they are both kind of in flight. We're just finalizing. I think we're in the planning stage right now. Over the next year, we'll be moving into testing the system. That will give us a better grounding to be able to come back to parliamentarians with what the full landscape looks like as well as the enterprise cost.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

At this moment in time, would you have a final cost as to the Dayforce system?

[Arianne Reza]

I don't think we have that final cost as we speak. We have the current contract, which is about $359 million.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much.

Next, we have Mr. Osborne for six minutes, please.

[Tom Osborne, Liberal, Cape Spear, NL]

Thank you.

My questions are for the office of the chief human resources officer.

The Phoenix system created many challenges, and part of that, I believe, was because it was a waterfall system. The new system is agile.

Can you explain to us the difference in the two systems and the benefits of the new system versus a system that's more rigid?

[Jacqueline Bogden]

If you'll permit me, I'm going to ask my colleague, Vidya, to explain that. She's more the IT expert on the team here.