Government Operations Committee on Nov. 29th, 2016

[The Chair, Conservative, Tom Lukiwski]

Ladies and gentlemen, we'll begin our meeting now.

I have a couple of quick announcements. There will be votes this evening. Everyone is aware of that. My understanding is that the bells will commence ringing at 5:45 p.m., which will interrupt our second hour, the examination of the supplementary estimates (B). I would recommend to the committee that we continue to sit until 6 p.m. That will give us at least an hour and a half to deal with the supplementary estimates (B), and still have 15 minutes to get from this room to the House of Commons. If I don't hear any objections, that's how we'll proceed.

Minister Foote, welcome once again to our committee, and thank you for being with us.

Today's meeting is to discuss, in the first hour, the continuing study on the Phoenix payroll system. The second hour and a half will be discussions with the Department of Public Works and Government Services on their supplementary estimates (B).

With that very brief introduction, Minister, you know how this committee operates. The floor is yours for your opening statement.

[Judy Foote, Liberal, Minister of Public Services and Procurement]

Thank you for the invitation to be here, and I welcome this opportunity, but first, I'd like those who are accompanying me today to introduce themselves.

[Ron Parker, President, Shared Services Canada]

I am Ron Parker, President of Shared Services Canada.

[John Glowacki Jr., Chief Operating Officer, Shared Services Canada]

Hello. I am John Glowacki, COO, Shared Services Canada.

[Alain Duplantie, Senior Assistant Deputy Minister and Chief Financial Officer, Shared Services Canada]

I am Alain Duplantie, CFO at Shared Services Canada.

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

Good afternoon. My name is Marie Lemay, and I am the Deputy Minister of Public Services and Procurement Canada.

[Gavin Liddy, Associate Deputy Minister, Department of Public Works and Government Services]

I am Gavin Liddy, Associate Deputy Minister, Public Services and Procurement Canada.

[Marty Muldoon, Chief Financial Officer, Finance and Administration, Department of Public Works and Government Services]

I am Marty Muldoon, Chief Financial Officer, PSPC.

[Judy Foote, Liberal, Bonavista—Burin—Trinity, NL]

It is a privilege for me to be here to give the Standing Committee on Government Operations and Estimates an update on the Phoenix pay system, as I had committed to do during my last appearance.

I am also pleased to participate in the committee's review of the supplementary estimates (B) for both Public Services and Procurement Canada and Shared Services Canada.

Allow me to repeat, as I have done many times, that it is completely unacceptable for any employees to not receive the pay they earn. I have been seized with this issue since pay problems first emerged, and fixing the government's pay system is a top priority.

Public service pay is complex and unique. There is no other pay system in the country with almost 300,000 employees, across 101 departments, with 27 collective agreements and 80,000 business rules.

The planning of Phoenix and the broader pay transformation initiative was flawed, but casting blame doesn't help public servants facing frustrating pay delays. They need solutions.

When I was made aware of the extent of the problem, I took early and decisive action. Many measures have been put in place since late spring to address pay issues and support our employees.

I announced the creation of a satellite unit in Gatineau to immediately begin working on the backlog. Over the summer, we added and staffed three additional satellite offices in Shawinigan, Winnipeg, and Montreal to provide additional support. I committed to keeping these offices until the backlog is eliminated and issues are resolved.

We've taken several steps to better support employees. We established a new call centre and a Phoenix feedback form to make it easier for employees to reach us and to report pay problems. We have communicated regularly about the availability of emergency salary advances for these employees affected by pay problems. We also provide regular updates to media and employees on our progress.

On the training front, we updated our materials for managers and employees, and we made more information available on our website. We also provided targeted training sessions to human resources advisers on how to effectively work with Phoenix. The department implemented system enhancements to improve how Phoenix functions and to increase automation.

Finally, we have worked closely with all of our partners. The Treasury Board Secretariat put in place a claims process to repay employees who have incurred costs related to pay issues, such as interest charges. The Canada Revenue Agency has information on their website and a 1-800 number for employees concerned about the tax implications of pay issues. We continue to collaborate with unions on a number of fronts, including a recent agreement to have government IT specialists help enhance Phoenix.

These measures have allowed us to make significant progress, but more still needs to be done.

Let me turn now to our efforts going forward. When I last gave the committee an update, my officials and I discussed our goal to eliminate the backlog of approximately 82,000 employee pay cases by the end of October. Despite our best efforts, we could not completely eliminate the entire backlog, and to date we have closed the cases of 83% of employees in the backlog.

The majority of cases left in the backlog predate Phoenix. These are complex cases that require time-consuming manual calculations. We are seeing cases that date back several years and involve multiple transactions. For example, when dealing with a retirement, it is common to first have to close several related pay transactions, such as salary increment increases, actings, and promotions.

Once all of these files are closed, there are additional transactions needed, such as termination payments and severance payments, before final payment to an employee can be issued. This process can be very lengthy where we are dealing with old files, and the verification of salary and other amounts is required.

As of today, approximately 15,000 public servants still remain in the backlog. It is important to note that these cases involve supplementary pay, but missing pay of any sort is concerning, and a priority that must be addressed.

These remaining cases are being handled by a dedicated group of expert compensation advisers, and our goal is to process them as quickly as possible.

During my last appearance, I also spoke about reaching a steady state, where pay transactions are processed efficiently, consistently, and with minimal errors.

We are now seeing much higher rates of productivity in our pay offices. Users have become more accustomed to the system and incoming pay requests are now processed more quickly and efficiently. For example, in May we processed about 40,000 pay transactions. However, in September and October, that number increased to approximately 100,000 transactions each month.

The dip in processing productivity after Phoenix was implemented had an impact on the caseload being carried in the pay system. For a period of time, we received more transactions than we could address.

Because of the situation, we had to refine our plan to reach steady state, which includes the following three elements: a concentrated expert team to eliminate the backlog; a prioritized approach for the timely processing of cases in or entering the pay system; and a process of validation and improvement.

This plan considers productivity rates, incoming work, the availability of employees, and other variables. It also prioritizes cases that may cause employees financial hardships or have tax implications, namely, those with disability claims, returning from leave, terminations, and new hires.

A key lesson taken from the Phoenix experience has been the need to consult widely and validate. This is why I have told my department to review the plan and its assumptions with other client departments, employees, and unions. This focus on validation will ensure we have a robust and reliable go-forward approach. Many good ideas on how to improve the pay system have come from our front-line compensation advisers.

Steady state won't happen tomorrow, but we're seeing progress. The processing times for certain transactions have already improved. For example, overtime is now processed automatically once entered and approved in the system.

Much of the discussion around Phoenix has focused on software, but at the heart of our pay system is people: those using the system and those depending on it for their pay.

In our public service pay centre in Miramichi, which I visited again this month for the third time, we are currently training our next generation of compensation advisers. A few weeks ago, the department welcomed a new class of 91 recruits who have started the one-year training program that will give them the skills needed to work at the pay centre. The program ensures the presence of a constant pool of qualified compensation experts.

At this point, Mr. Chair, I would like to acknowledge the hard work of the employees in Miramichi. They are dedicated, committed, and are working so hard on a daily basis to make a difference.

As the year-end approaches, we are acutely aware that employees who were not paid correctly are worried about tax implications. Public Services and Procurement Canada is working closely with the Treasury Board Secretariat, the revenue agencies, and the unions to minimize the potential for problems and to ensure that employees have the information they need.

Employees can visit the CRA website or contact their call centre for general inquiries about taxes. Employees looking for information on their T4 slips can contact the Phoenix call centre.

There is a significant effort under way to support employees experiencing pay issues.

If employees have been overpaid, these amounts will be recovered over multiple pay periods to lessen the impact. We are working directly with employees facing financial hardship to identify other payment arrangements, if needed. Those who have incurred out-of-pocket expenses as a result of missing pay can seek reimbursement through a Treasury Board Secretariat claims process.

I understand and appreciate this has been a very difficult situation, and I appreciate as well the patience of everyone whose pay has been affected.

Thank you to the staff who are working so hard to process pay transactions. On my most recent visit to the pay centre in Miramichi, I heard from employees about the progress being made and the challenges that still remain. This team is dedicated to helping their colleagues across the government, and I expressed to them my support and gratitude.

There are important lessons to be learned from this experience. That is why I called the Auditor General of Canada to do a full review of the Phoenix project. In the meantime, I have put on hold plans to transition additional departments to the pay centre.

The government needed a new pay system. However, the planning of Phoenix and the broader pay transformation initiative was driven by cuts instead of by service. The former government sought annual savings of $17 million at the expense of employees.

Mr. Chair, I don't need to convince anyone that Phoenix should have been better planned and implemented. Pay transformation was compromised as soon as the decision was taken to eliminate the jobs of some 700 compensation staff before we had transitioned to Phoenix. Had those jobs been kept longer, we would not be in the situation we are in today.

We have been working very hard to address pay issues. Our backlog is almost 80% eliminated. Processing rates are up, and we now have a plan to arrive at our steady state.

There is still much to do, and deputy minister Lemay will provide a new update on our progress toward resolving backlog cases and an update on our plan to reach steady state when she meets with the media on December 14.

Turning now to the department's supplementary estimates (B), but keeping with Phoenix, the department identified the need for an additional $50 million in extraordinary funding and is requesting this funding in supplementary estimates (B). We discussed this figure when I appeared before you in September.

The funding is composed of $5.7 million for additional support from IBM, such as a 24-7 troubleshooting support and refinements to the system; $24 million for our satellite offices and call centres; $16.1 million for our complaints centre, training and support to departments, and system maintenance; and $4.2 million for contingencies.

Turning to Shared Services Canada's supplementary estimates, Shared Services Canada is seeking additional funding of $4.7 million, which would be largely used to support initiatives under way at client departments. For instance, $1.6 million would go to help modernize Canada's weather radar network for Environment and Climate Change Canada.

Other funding is directed to support ongoing projects at Immigration, Refugees and Citizenship Canada and the Canada Revenue Agency. Also, $1.5 million is earmarked for added telecommunications costs related to new government employees.

These investments would strengthen and complement the work of Shared Services Canada as it also resets its transformation plan.

Thank you for your attention, and I'm happy to answer your questions.

[The Chair, Conservative, Tom Lukiwski]

Thank you, Minister.

Minister, before I turn to our committee members for questions, we have you scheduled until 4:30, but your opening statement was a few minutes over what we expected. Minister, would you be prepared to stay here about an additional five minutes, so that we can get an entire round of questioning from all our committee members?

[Judy Foote, Liberal, Bonavista—Burin—Trinity, NL]

Absolutely.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

We'll start with our seven-minute round, then.

Ms. Shanahan.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you very much to the minister and all the members of the panel for being here today.

Of course, we didn't really want to be back here today for this update. This committee was told the problem would be resolved by October 31, and yet here we are.

It's most concerning that we still have 15,000 employees who are experiencing difficulties. Also, what's going to be coming down the road is concerning, with all of the adjustments that have to be made to employee pay. Having worked in a payroll department myself some time ago, I can just imagine the T4s and having to deal with the out-of-pocket expenses.

I do commend you on being proactive in calling on the Auditor General to conduct an audit into the Phoenix pay system. I know, from sitting on the public accounts committee, that this would have been our concern, as well, given the amount of taxpayer funds this represents.

I'm somebody who likes to go to the root causes of problems, so what really concerns me in all of this is that it could have been avoided, to a large extent. I think back to the fact that you had to rehire experienced people and less-experienced people. I can just imagine that staff who were let go two years ago, prior to the transformation taking place, were experienced staff. They probably went off and found other jobs, and when it came time to address this lack of capacity, you had to go out and find people, hire them back and train new people, leading to even more problems down the road.

Minister, could you talk about how difficult that was in just trying to roll back the compensation department to where it needed to be, including the satellite department in Miramichi?

[Judy Foote, Liberal, Bonavista—Burin—Trinity, NL]

What became obvious to us as the system was rolled out was that removing 700 compensation advisers before the vision had actually been realized, in terms of the new pay system being up and running as it should, really had a detrimental impact, because we did not have the experience there. We did not have the individuals who were familiar with all of the 80,000 regulations, the different union agreements, what was required in getting the job done.

When the decision was made by the previous government to remove the 700 compensation advisers, clearly they didn't take into account what was really important here, which was to make sure that, if you're going to transform a pay system, you do it with people who know what they're doing. By removing those individuals, they removed a core component from the 46 departments that were actually being covered with the February and April rollouts.

The departments that didn't have their compensation advisers removed are not experiencing the same degree of difficulty as are the other 45 departments where the compensation advisers were removed. That speaks for itself, in terms of the impact. You learn from experience, but unfortunately it's a hard lesson to learn for those employees who have been impacted by pay issues.

I feel comfortable in saying that if the employees had not been removed, had been allowed to stay until the system was up and working as it should have been, then we would not be here today having this discussion.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Minister, once you were in place, you reported in February that when phase one was scheduled to start, your department told you it was ready to go and you gave the signal to go. It was the same thing with phase two. By the time May, June, and July rolled around and it had reached a crisis point, you met with this committee again to say that October 31 would be the date.

Do you have confidence in what your officials are telling you? This is really the concern we now have with your leadership in the department.

[Judy Foote, Liberal, Bonavista—Burin—Trinity, NL]

I believe the employees in the department are working very hard to make sure we meet the deadlines. Unfortunately, what happened with the October 31 deadline was that there were a significant number of backlogged cases that were very complex. As much as I and the department wanted to meet that deadline—no one puts a deadline in place not expecting to meet it—clearly the complications they ran into with the backlogged cases, and there are still 15,000 of them, prevented us from meeting our goal.

You know, everybody wanted a win here. I know the department has been working really hard. I have confidence that they are doing the best they can. I think we need to find out exactly what happened to get us in the position we're in. That's why I called in the Auditor General to do a review of this. No one wants to do a bad job. Everybody is working as hard as they can to fix this problem.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you, Minister.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Clarke.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Thank you for being here, Minister. We very much appreciate it.

I think that today we have good news. I see in your introductory notes that you have a more careful tone and that you have a more objective interpretation of the work ahead than was the case in July. You said, “Steady state won't happen tomorrow but we're seeing progress” and that in the meantime, “I have put on hold plans to transition additional departments to the pay centre.” I want to congratulate you on being more careful in your interpretation of the situation.

Minister Foote, I'm having a hard time deciphering the statements provided to the committee and press conference statements, because the numbers are sometimes from only the Miramichi pay centre, and then afterwards we're told that satellite offices are also struggling with Phoenix.

The second point of confusion is derived from the numbers being presented sometimes as the number of files for individual public servants and then suddenly as the number of transactions.

The final but biggest frustration is receiving numbers based on backlogs, the first backlog and the second backlog, instead of based simply on the number of all files presently left unresolved.

All this jargon makes it impossible for someone who is not a pay specialist to truly be able to gauge the magnitude of how many public servants are awaiting payments to be processed right now. Here is what I as well as our journalist press group friends would like to understand clearly: What is presently the total number of individuals, current and former public servants, waiting for funds from all pay centres in Canada?

[Judy Foote, Liberal, Bonavista—Burin—Trinity, NL]

In our backlog, we still have 15,000, and those are the complicated cases that I referred to. In the initial discussion around a backlog we talked about 82,000 cases; we still have 15,000 employees who are waiting for supplementary pay.

Within Miramichi and our satellite offices, we are dealing with our day-to-day issues that arise. We still have a regular payroll that gets paid every two weeks with approximately 300,000 employees getting paid. The difficulty that occurs is with overtime pay, but now that we've automated that, of course that's not an issue to the degree that it was.

New hires—

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Sorry to interrupt, Minister.

Of the 82,000 cases that were backlogged on July 5, there are 15,000 cases left.

[Judy Foote, Liberal, Bonavista—Burin—Trinity, NL]

Yes.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

How many cases have arisen since then that are not part of the 82,000? Are there any new cases? If not, we would like to know.

[Judy Foote, Liberal, Bonavista—Burin—Trinity, NL]

What we have going through Miramichi are cases that come in on a daily basis, so the input and the output can vary. As I said in my remarks, in May we were at a point where we were processing 40,000 cases there. Today, we can actually process 100,000 a month. Both the number of cases that come in and the number of cases that get dealt with vary from day to day, but on average we are able to process 100,000 cases a month if we have them.

We took people out of Miramichi and assigned them to work on the backlogged cases, so there was a build-up of cases in Miramichi that we had to deal with. We have about two months' worth of work built up there. If we can put through 100,000 a month, that means there would be about 200,000.

[Alupa Clarke, Conservative, Beauport—Limoilou, QC]

Another thing we find a bit shocking is that according to the official position, which we learned from newspaper articles, memos were sent out within the Department of National Defence, for example, to require that pay advisers get their Phoenix system training and present proof of their certificate of completion in October, because only about half of the pay advisers had completed it at that point. It had not been made mandatory at the start, apparently.

My question, Minister, is this. Halloween was the date set for clearing the backlog. If we go back a bit earlier, on September 19 you said there was no reason to believe that the backlog wouldn't be cleared by October 31. How could you say that then when half of the pay advisers had not even received the formal training for the program they were meant to be using?