Government Operations Committee on July 28th, 2016

[Kelly McCauley, Conservative, Edmonton West, AB]

Ms. Ratansi took the words out of my mouth.

[The Chair, Conservative, Tom Lukiwski]

Thank you.

Now, procedurally, unless there are further comments, we will vote on the amendment.

Mr. Weir, I'll try to summarize. If I'm off base here, please correct me.

The amendment is to include in addition to the deputy minister of Public Services and Procurement all the public officials whom I had identified in my opening remarks, including the leaders of the two public service unions as well as two associate deputy ministers.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

You've given an amendment. I am fine with it, but in terms of managing the way in which we are going to call the witnesses forward, I'd appreciate it if we could go with the deputy minister first and then we can go with the public service unions and other members who are there. That would be fine by us.

[The Chair, Conservative, Tom Lukiwski]

Mr. Weir.

[Erin Weir, NDP, Regina—Lewvan, SK]

Just to clarify, is the proposal to have an hour with the deputy minister and her officials, and then an hour with representatives of the two federal public service unions?

[Yasmin Ratansi, Liberal, Don Valley East, ON]

I think that would be ideal.

[The Chair, Conservative, Tom Lukiwski]

If I can interject again, if you don't mind, since we have no pre-determined adjournment, it would be an hour. It could be less, it could be more. It depends on how many questions come from this committee. So when witnesses approach the table—and I'll have to deal with that in a moment, how we get them here—you can ask questions until the sun goes down.

They are not here restricted to one hour. They're not here for a full hour. It all depends on the committee members and their questions.

Are we in agreement then that if the amendment passes, we will request the deputy minister plus the associate and assistant deputy ministers to approach the table? We will need agreement from this entire committee for that, if the motion passes, followed by the two leaders of the public service unions.

Are we all clear on that?

Then on the amendment, all in favour? All opposed?

(Amendment agreed to)

The main motion, all in favour?

(Motion as amended agreed to)

Now we will deal with this immediately, but we will need agreement. Even though the motion has passed, we have not actually made a formal request for those officials to come forward.

Madam Ratansi, committee members, will you all agree to my calling the senior officials from the public service forward?

[Some hon. members]

Agreed.

[The Chair, Conservative, Tom Lukiwski]

We then ask Madame Lemay, Madame Di Paola, and Mr. Liddy to approach the table.

Thank you all for being here.

Madame Lemay, I understand you have some opening remarks. Please proceed, and if you wouldn't mind, even though I've called you all forward, please introduce your colleagues for the benefit of the committee.

[Marie Lemay, Deputy Minister, Department of Public Works and Government Services]

Thank you very much.

Good afternoon. I appreciate the opportunity to appear before this committee to discuss the Government of Canada's new pay system, Phoenix, and our plan to address some of the issues that we're facing.

I can certainly appreciate your interest in understanding the challenges that we're facing.

Accompanying me today are associate deputy minister Gavin Liddy; and Ms. Rosanna Di Paola, the associate assistant deputy minister for accounting, banking, and compensation.

I'll begin with a little background on the Phoenix system and we'll then provide you with an overview of the challenges we faced, and where we are today, before discussing our plan to resolve these issues, if that's okay with you.

Before going further, I want to emphasize that it is unacceptable for any Government of Canada employee to go unpaid or to be incorrectly paid for the work performed. Employees are coming to work every day, they're putting in the hours required of them and sometimes more, delivering the services that Canadians require, and they're keeping our country safe and secure. In exchange, they're owed timely compensation to pay their mortgages, to feed their families, and we definitely understand that.

Now I'd like to provide a bit of context for the serious need underlying the Government of Canada's decision to adopt a new pay system and the challenges associated with such a complex undertaking.

Public Services and Procurement Canada is responsible for administering the pay of more than 290,000 federal employees, in other words, everyone working in the more than 100 departments, agencies and organizations that make up the federal public service, in addition to MPs, senators, and their staff.

Administering pay for the Government of Canada is complex, given that some 27 collective agreements setting out more than 80,000 pay rules had to be programmed into the system. A number of years ago, it became very clear that the federal government's pay system had become inefficient and was at risk of failing.

The regional pay system, as it was called, was more than 40 years old. Over 1,000 workarounds and temporary patches had been deployed over the years. It had become increasingly difficult to maintain, and it relied on outdated technology that put the sustainability of the administration of pay at risk.

At the same time, the pool of specialized employees with knowledge of the outdated technology was fast disappearing. A major outage would have put pay service operations at risk for weeks, even months. In fact, a major system failure in 2003 affected the pay of 4,000 public servants.

The Government of Canada initiated plans for transforming the administration of pay services through two related projects. The first project was to replace the outdated pay system through the purchase of a new off-the-shelf commercial system that would be integrated with government human resources applications. As part of the procurement process, the government acquired the PeopleSoft-based system, a reputable and well known payroll software. Working with the vendor, IBM, the department configured it and called it Phoenix.

The other project was to consolidate front line pay services administration from across government to a new public service pay centre in Miramichi, New Brunswick. The Miramichi pay centre was staffed with 550 employees, who were hired in three waves, the last of which was completed in December 2014.

A report by the government operations committee in 2008 recommended support for pay modernization and for potentially redistributing activities to the regions. The goal was, and remains, to attain a modern, responsive, and flexible pay system that is also cost-effective and sustainable.

Deployment of the Phoenix pay system required six years of preparation by our and other departments, as well as IBM, the supplier responsible for Phoenix's design and implementation. More than 16,000 different pay scenarios were tested to make sure the software ran smoothly.

At IBM's recommendation, the original deployment schedule was delayed to allow for further testing and ensure due diligence. The scheduled October 2015 rollout was pushed back to February 2016, and the December 2015 rollout was postponed to April 2016.

In December, positive test results and a third-party review confirmed the decision to go ahead with system implementation. In addition, in January, consultations with deputy ministers from all the departments involved resulted in support for system deployment. Therefore, on February 24 of this year, Phoenix was rolled out for 120,000 employees across 34 departments. On March 9, the first batch of Phoenix-issued paycheques were generated. On April 21, another 67 departments were integrated as part of the second rollout, representing a total of nearly 170,000 public servants.

When Phoenix went live in February, the pay centre had a backlog of 20,000 employee cases that should have been cleared prior to implementation but weren't completed on time. This was exacerbated by backlogs in departments. For example, after going live with Phoenix we received 20,000 employee extra-duty pay requests. As well, there was a steep learning curve associated with the new system within departments and the pay centre. Therefore, despite the significant planning and preparation, we have faced critical problems affecting a considerable number of employees who have experienced a pay issue of one kind or another.

I'll give you a sense of the different categories that we're addressing in priority sequence, the numbers associated with each, and our plan to address the situation.

Our top priority is employees who are not being paid. As I already mentioned, that is completely unacceptable. Those affected are mainly new hires, students, and employees who are returning to work after being on unpaid leave and whose pay has not been restored.

At our technical briefing last week, I indicated that 720 employees had reported not receiving any pay. We committed to making sure 486 of them received a payment on the next payday, so July 27. I can tell you that all of those employees received their pay yesterday. We expect 139 of the remaining employees to be paid on August 10, since we now have the information we need to proceed. We are still waiting for information on 35 employees, and after a thorough check, we determined that 60 individuals did not appear in our system.

Since last week, another 589 employees have reported problems tied to missing pay. We are addressing 210 of those cases, with the objective of paying them on August 10. Like last week, we are working with departments to resolve cases where we are lacking employee information.

The second priority is employees whose pay may be affected by their going on leave or exiting the public service. Last week I reported that about 1,100 employees had brought these issues to our attention. Since July 18, we've addressed 74 cases, and we're processing the remainder as quickly as possible. Employees reporting these types of issues can expect to have their case addressed within six weeks.

The third priority is those who are receiving regular pay, but missing supplementary pay, such as acting or extra duty pay and salary increment adjustments. This group consists of about 80,000 employees. Without diminishing the importance of this, these are employees who are receiving their regular paycheque, but are missing amounts. Since July 18, approximately 1,100 employee cases out of the 80,000 backlog have been resolved, and those employees will see the adjustments on their August 10 paycheques if they haven't already seen them.

We are not finished, but we are making progress. We are also taking steps to make sure all cases are processed.

First, we have hired more people and are creating temporary pay offices all over the country.

We increased the number of staff at the pay centre in Miramichi, adding 40 employees at the beginning of the year. We are currently taking steps to manage the workload of employees at the centre, who have been dealing with excessive workloads in recent months.

Yesterday, Minister Foote and I had the opportunity to meet with employees at the Miramichi pay centre. We thanked them for their hard work and repeated the message that they were not to blame for this situation.

We created a temporary pay unit in Gatineau with 57 employees so far. We expect that number to rise to 115 in the coming weeks. I want to say how grateful we are for the support of our union partners, who are helping us find ways to encourage employees and rehire former compensation advisers on a temporary basis.

We are also creating temporary regional hubs in Winnipeg, Montreal, and Shawinigan. The Winnipeg office, which has 20 compensation advisers, will start processing cases in mid-August, and we expect the number of staff to rise to 50. The hubs in Montreal and Shawinigan should be up and running in the coming weeks, with 20 compensation advisers at each location.

In addition, we have set up a national call centre in Toronto. This is not a compensation centre but, rather, a call centre. Yesterday, the centre received 2,500 calls. None were dropped, and the average wait time was under four minutes. Callers with missing pay issues are referred to the pay centre using an electronic form that the call centre agent fills out.

Secondly, we are ensuring that there's flexibility in the system to address the very real financial needs of every affected employee. We've encouraged managers to take advantage of the existing processes through which they can issue emergency payments to employees. The Treasury Board Secretariat is exploring options to reimburse employees for the out-of-pocket expenses they have incurred as a result of inaccurate or missing pay.

We have encouraged employees to report their pay problems as quickly as possible through our website and to speak to their manager if they have a pay problem, to discuss the next steps and the resources available to them.

Thirdly, additional resources are being developed to ensure all Phoenix users fully understand the roles they play to keep pay requests moving quickly and accurately.

This issue is at the heart of the problems we’ve faced. While we provided training to employees and met with every department on a weekly basis prior to implementation, it’s clear that we under-estimated the amount of time it would take for all users to be become trained and familiar with the system. This has created extra stress for the employees at the Public Service Pay Centre.

Enhanced tools and additional training are being developed and will be offered to both employees and managers in our department and other departments.

The first set of tools will include job aids, tutorials and webcasted events and will be made broadly available across the public service in the coming weeks.

In addition, our department and the Canada School of Public Service are working together to develop additional mandatory training to help employees and managers. We will also be developing a tool kit for managers with reference materials such as checklists and tips for helping employees who are having pay issues.

We've already completed enhancements that are speeding up transactions. For example, the pay system now recognizes automatically adjust level for acting to ensure compensation is paid at a correct rate.

Fourth and most importantly, we're working on the system itself. We continue to make adjustments and move forward with plans offering enhancements that are increasing automation and shortening timelines. We've started sending managers emails notifying them that they need to approve a transaction in the system. We expect this will have a substantial impact.

While I can tell you that these actions are proving effective, they do not for one minute negate the fact that every employee deserves to be paid for the hours they put in. Anything else is unacceptable.

Last week I reported that two privacy breaches related to the Phoenix pay system have been fixed. On July 26, I was made aware of a further privacy breach allowing four employees to access names and identification numbers of employees from other departments. We have informed the Office of the Privacy Commissioner. Our special investigation unit has assessed and reported that these breaches are deemed very low risk. I have instructed my department to conduct additional testing to identify additional potential vulnerabilities.

The road to pay transformation has not been smooth, but we are committed to learning from this process. We are committed to independent assessments that would provide valuable insight into the planning and implementation of major projects and that would benefit our department and other government organizations.

Minister Foote has asked the Auditor General of Canada to review the implementation of the Phoenix system. If there is an audit, we will, of course, fully support the Auditor General and his staff in their work.

In closing, I want to acknowledge the hard work of the Phoenix project team and the employees at the Public Service Pay Centre. I also want to thank the other departments for their support.

I look forward to helping the committee with its work.

I want to reiterate to the committee members that we are in the process of fixing the problems and that getting employees paid remains our most urgent priority.

I was asked yesterday by someone, “Did employees get paid today?” The answer to that question is that over 294,000 got paid their regular pay yesterday and, in addition, close to 35,000 of other types of payments, such as extra-duty pay, were received.

Thank you. I look forward to your questions. My colleagues and I are here to answer any questions you may have.

[The Chair, Conservative, Tom Lukiwski]

Thank you, Madame Lemay.

For the benefit of the committee, even though this is a special meeting, I'm going to recommend to the committee that we follow the normal rotation of slots that we have in our regular committee meetings. As a refresher, that means the first round will be seven minutes for questions and answers. That will include two Liberal speakers, one Conservative, and one New Democrat. The second round will be four speakers for five minutes, with two Conservatives and two Liberals. The third round will be one three-minute intervention by Mr. Weir. We will then go back to the start with seven, five, and three, and continue questioning until all questions have been posed and answered.

With that we will start our seven-minute round with Madam Ratansi.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you, Chair, and thank you, Madame Lemay and your colleagues, for being here.

We're all here today because, as you mentioned, it is unacceptable that a single person who has worked and put in the hours is not paid. My colleagues and I have seen or heard from lots of our constituents constantly that these people have not received their pay. There is dire hardship and we would like to resolve the problems. We don't want to put blinkers on. We're not in the habit of putting blinkers on, so we would like to resolve the issue.

You have just made a presentation that you ran in parallel 16,000 test cases before you made the system go live. Is that correct? Yes.

Was there a parallel system running and, if there was, were there kinks in the system brought to your knowledge?

[Marie Lemay]

I'm sorry, I just want to make sure that I understood the question.

You're wondering if we saw some of the challenges before launching the system.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Yes. Did you run a parallel system while you were doing...?

[Marie Lemay]

We did.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Okay.

When you were testing the system, were there issues you encountered that brought some concerns to you?

[Marie Lemay]

There were, and that's why the actual launch was delayed. There was a third-party evaluation. The whole launch was delayed until everybody felt that...first of all, the vendor, the departments.... We had a third-party evaluation. There was a state of readiness that was established to be a good state to move forward with the launch.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Was the problem with Phoenix a technical problem or a human resources problem? What was it? Was it a combination of both? Because these problems, whether it's 750 people not getting paid or one person not getting paid, are really unacceptable. People have faced a lot of hardships, as you know.

What was the reason there were issues? Were there technical problems with the system?

[Marie Lemay]

To me, when we talk about the system, it is from the moment somebody works until that person get a paycheque in his or her bank account. There are many parts in this system. There is obviously the user, who has to put information in, and managers, who have to approve. There is the software that is in-between, and there is the pay centre, where compensation advisers have to work. So there are different elements in that system.

We knew, and I think it was a recognized fact, that when you launch a system and a transformation of the magnitude of this one—remember that we're talking about close to 300,000 employees and over 100 departments.... Remember the rule we talked about, the 80,000. This is a massive undertaking.

There was a recognition that there were things that you would not know until you actually turned the system and that there would be a learning curve for people in getting used to the system.

In my assessment, when you look back, I would say there were two things we did not see coming. The first thing was that we did not expect to have a backlog when we transferred. So at the end, before the transfer to Phoenix, a number of transactions were there, at the very end, as we were about to change to Phoenix. There were about 20,000 transactions that arrived at the tail end that we didn't have time to process. So we started with a backlog.

On top of that, about 20,000 extra-duty pay transactions were transferred to us, once the system was launched, that were actually pre-Phoenix. So we started with a backlog of 40,000 transactions right there. That part we had not evaluated properly.

The other thing we underestimated, I believe, was the time and effort we would need to make sure that the users understood the new system, because it's a different system in terms of use.

I'll give you a short example: overtime. It used to be that you would fill out your form for overtime, and then it would take eight to 12 weeks to get paid, because it was paper and it would go through the system. Today if you work overtime, you enter it, your manager approves it, and it's paid on the next paycheque.

If you enter your overtime.... Maybe overtime is not a good example. I'll give you the example of acting pay. Acting pay is the same thing. If you enter the acting pay when a person is acting in a position, it will be done automatically. But if you decide to wait, and a month or three months later, you say, “Oh, I have to make sure that this person gets the acting pay”, and it is then processed, it becomes a manual transaction. It's not automated, because it's outside the current system.

It's a system that is made to be used live. There are a lot of things I think we underestimated that we needed to make sure employees understood: how to use the system, what to do. That's what we're working on very hard.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Going forward, with the solutions you have shown us, or the actions you have taken, are you satisfied that this system will go forward without a glitch or that people will be paid and we won't hear any more complaints about it?

You say there are 234 people who have still not been paid. They'll be paid August 10.

Is that acceptable?

[Marie Lemay]

I would say in response that we expect there to be a transition period. There is a transition period where we will face issues that we have to correct, whether it's how we program the system, make adjustments to some of the rules, whether it's making sure people understand how it's used, making sure that managers understand that they need to do some of the paperwork, whether it's onboarding or others right away.

These things will keep happening for a bit as we are transitioning. There is a learning curve. To say to you that we're done and we're not going to have any more issues...we fully expect that we will keep seeing some issues. The key thing is that we now understand where the backlog is and the composition of how we got here. But more importantly, we have a process for people who do not get paid. If somebody doesn't get paid, we absolutely need to know about it because if we don't know, we can't address it. If we know, we're able to go to the root cause and find out why they're not getting paid. So far, we've been able to address many of them. If we find another reason we will address it. It's really important for employees to tell us when they have pay issues so that we can adjust the system.

The good news is that because we have the temporary centres—and we have, as I've told you, several of those now—we can deal with the backlog that was created and monitor how we're doing at the Miramichi pay centre, where there is still a learning curve. Indeed, it's a new system there too. They're doing much better in terms of the system. Yesterday, employees were saying that it's been a huge difference from day one to now in terms of their use of the system. We'll monitor that very closely. We will keep the temporary units until we've reached a steady state. We have them for the transition period. Once we've reached a steady state, and Miramichi is processing and the system is functioning how it should, then we'll be in a position to remove them.

[The Chair, Conservative, Tom Lukiwski]

For the benefit of the committee members, just because of the subject material here, I'm going to give a little latitude on the length of questions and answers. That was a fair bit over seven minutes, but, again, I think it's important that everyone gets a full understanding of what's going on within Phoenix.

We'll turn now to Mr. McCauley for seven minutes, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Ms. Lemay, it's known that executives of the public service are eligible to receive performance bonuses. Have any current or former executives from the Department of Public Works received bonuses in 2015?

[Marie Lemay]

In 2015, I would have to look. I'm sorry, I wasn't there in 2015. In 2016 I can tell you, no.

[Kelly McCauley, Conservative, Edmonton West, AB]

Well, the year is not over yet, so....