Public Accounts Committee on May 6th, 2026

[Vidya ShankarNarayan, Senior Assistant Deputy Minister, People & Culture, Office of the Chief Human Resources Officer, Treasury Board Secretariat]

Thank you, Chair, for the question.

The Phoenix system was designed and implemented with a waterfall approach, where the system was fully built and then it was implemented in waves for departments. Once the system was implemented at that time, Phoenix was a pay consolidation system only, not an HR system consolidation. The Government of Canada continued with over 30 HR systems that fed into one pay system, which was Phoenix.

With the next generation of HR-to-pay, which is the Dayforce system right now, we are consolidating all of the HR systems into one, and the pay gets consolidated in an agile manner. When I say “agile”, it is because as we are designing the standardized processes, we are going to test our design of the standardized process with three vanguard departments: the Canadian Nuclear Safety Commission, Shared Services Canada and Public Services and Procurement Canada itself.

The reason for the agile process is that we want to test our design of processes before we go into full-fledged implementation. If the testing results in issues, we can go back and change or pivot our design to update it. This is where the agility comes into play.

The three specific vanguard departments are very different. One is a separate employer. Shared Services Canada is a very unique department. Then we have Public Services and Procurement, which is almost a mini-government with a large number of job classifications.

I will pause there and go back to the chair.

[Tom Osborne, Liberal, Cape Spear, NL]

If I understand it, in the pilot, you have the agility with the new system to make those changes, if changes are needed, as the system is operating. With the old system, that wasn't quite so easy.

[Vidya ShankarNarayan]

Yes, when we pilot with the three departments, we may receive a number of comments with regard to challenges in the processes. Some may go really well, some may need minor changes or some may need major changes in the design. We can actually make those changes and pivot in the new system before it moves into full-fledged implementation for the rest of the government.

[Tom Osborne, Liberal, Cape Spear, NL]

Can you describe for us the accessibility passport? I believe that allows, if somebody changes from one department to another, if they take on a different type of employment or if there are changes in their employment contract.... Can you just walk us through the accessibility passport and what that will allow in the new system versus the old system?

[Vidya ShankarNarayan]

Absolutely. The accessibility passport was also in the recent report from the Auditor General that was published this week, on Monday.

We recently launched a new digital passport, which is centralized at the Treasury Board. Employees fill the passport out once to request their specific accommodations in their workplace. We do know there is still a lot of work for us to do with regard to accommodations, so we are far from declaring victory there. There are a number of processes that we need to be more efficient with.

However, by centralizing the accessibility passport, employees tell us once and when they switch departments, the passport gets switched with them. They do not have to inform their new department and start from scratch each time. We know that in the government, employees do switch departments, which we encourage as well, so they can get experience horizontally.

Fifty-five departments have already been onboarded to the new digital passport, which is step one for us to become more efficient in our processing of accommodation requests. We still have a ways to go to be as compliant as possible.

[Tom Osborne, Liberal, Cape Spear, NL]

What are the benefits of HR being included in the new system? I think the old system was only payroll. The new system includes HR.

Can you explain to us the benefits of that, and where it may cut down on some of the challenges the old system had?

[Vidya ShankarNarayan]

Absolutely.

In the previous system, which was Phoenix, pay was centralized, but HR processes were not centralized. The chief human resources officer set the HR policies and directions, but each department set up its own HR IT system within the guardrails of the policies. Because you had each department and agency, under their deputy head, setting up individual HR systems, these were set up based on their own requirements for customization.

The Dayforce system is one HR system. What we are doing, as part of the office of the chief human resources officer, is standardizing the processes that departments will use to work with the new system. The upstream process, wherein pay actions start with each manager and their employees, will be standardized. Instead of having 30-plus processes, we will have one.

[The Chair, Conservative, John Williamson]

Thank you. That is your time, I'm afraid.

Mr. Lemire, you have the floor for six minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Chair.

Thank you, Auditor General, for your report. It sheds light on the practices.

I'd like to thank all the witnesses who have travelled today to appear before us.

Ms. Reza, the Phoenix system was implemented in 2016. It was valued at $272 million. Like many other IT systems, its cost was grossly underestimated. Now that the decision has been made to replace it, approximately $5 billion is going to be thrown in the garbage, including $2 billion that was invested simply to fix the problems with Phoenix.

The contract with Dayforce was signed in 2019. It was valued at $57 million, another significant underestimate. On June 11 of last year, Minister Lightbound announced the awarding of a 10-year contract to Dayforce, valued at $350 million, with a possible extension to 20 years.

In the Auditor General's report, we see that there is already a cost overrun less than a year after the initial amount of $565.9 million was approved, for December 2026. We're already talking about an additional $200 million.

How do you explain that, at the start of a project that was estimated at $4.2 billion, there is already an overrun of the over $500 million cost?

[Arianne Reza]

Thank you for the question.

I'll start by explaining that we've already spent $4.2 billion to manage the Phoenix system, to try to get all the expenses in order and to see what's going on. As has been well described, there are 100 departments, and we're trying to manage the business costs related to human resources and all the people who have to work to pay employees.

Now, we awarded that contract to move forward. I think you note that the contract numbers have gone up. It's because Dayforce was selected through a competitive process in which other suppliers took part. We had an initial contract for a short period of time, and everything that was added to it was planned.

To date, we have already spent all the funds related to the Phoenix system, whether for reports or for the people who help us manage the system. In fact, a question was asked about what we are doing about the agile system. Right now, if Phoenix needs to be updated, something very technical needs to be done at the same time. There's not enough flexibility in the system. To add some, we'll use digital means.

I'll leave it at that. Ms. Steele may want to add something.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

We can assume that there will still be Phoenix-related expenditures, even though the software will soon be retired.

Is that correct?

[Arianne Reza]

Right now, the expenditures are related to Dayforce. As we discussed earlier, there will be a period when the systems will be launched in parallel. There will be additional costs in the future. I hope they are minimal.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Yes, we all hope so.

In annex 1 of budget 2025, on page 275, the government indicated that it invested $786 million last year to modernize the pay system. However, the cost of the contract right now is $565 million.

Where did the cost overrun of $200 million come from?

What's more, as I understand it, an additional $786 million will be invested this year, which will increase the total cost over two years to $1.5 billion.

[Arianne Reza]

It's not just the contract that we have to manage. I think there are around 3,000 employees working to reduce the backlog and make sure that the rules we were talking about earlier are kept to a minimum and are consistent. We have to manage the entire program. There are a lot of employees working very hard, and that explains the other costs.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

In budget 2023, Public Services and Procurement Canada invested $1 billion to address your employees' pay issues. Simply put, when we look at the Auditor General's graph under exhibit 2 on page 9, you've gone from around 184,000 employees affected by the transactions to 134,000 employees. That means that it costs about $20,000 per employee to resolve pay issues.

How do you explain that there are still payroll errors after a $1 billion investment? What is the problem?

I think we would prefer to use the average of $20,000 per employee to promote retention or job quality, rather than to make corrections or pay IT companies.

[Arianne Reza]

I can't speak to the $20,000 because it's actually an inventory. That means that every time there's a new case, we have to address it. Cases include someone starting a position, holding an interim position or going on maternity leave. Of course, there will always be cases every day when someone makes a decision.

Some cases have been in the inventory for over a year. However, we are in the process of reducing that number every day. Since the graph was created, the number of cases has dropped to 88,000.

We can't equate one case with a cost per case. It doesn't necessarily work that way.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I understand, but the average is still $20,000 per employee. I think that number speaks for itself.

Ms. Hogan, right now, we're obviously talking about Dayforce and Phoenix. We've talked a lot about Cúram, and I think we'll talk about it again. Today, in question period, we were talking about PrescribeIT. In the past, there was ArriveCAN and others.

Are you investigating or planning to investigate other IT programs, particularly when it comes to the aspect of cost estimates, which are obviously always underestimated?

[Karen Hogan]

A few years ago, we did an audit on the modernization of benefit programs, the Cúram system you mentioned. We plan to revisit the issue. We intend to table a report in 2027.

I know there are a lot of questions. A lot of people are asking us to do an audit on PrescribeIT. We have just received that request, and we will consider it when we plan future audits.

In 2027, we will review the file related to the Cúram system.

[The Chair, Conservative, John Williamson]

Thank you.

I will now begin our second round, which will consist of five members with various times each.

Mr. Deltell, you have the floor for five minutes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

Thank you, Mr. Chair.

Good afternoon to my colleagues.

Ladies and gentlemen, witnesses, welcome to this parliamentary committee of your Canadian Parliament.

I'd like to take a bit of my time, Mr. Chair, to ask you the usual question I ask at the start of every meeting.

Have we heard anything from the Minister of Finance and National Revenue, the hon. François‑Philippe Champagne, about the request we made 58 days ago? The request was to get an explanation from the minister on the Laval scandal, now that the Canada Revenue Agency is demanding that the people of Laval pay $1 million after being robbed by a corrupt former mayor.

[The Chair, Conservative, John Williamson]

Mr. Deltell, so far, we've heard nothing. I'm sorry.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

That's quite incredible and disappointing, Mr. Chair. We made the request 58 days ago. We understand that the Minister of Revenue is also the Minister of Finance. We also understand that he recently tabled an economic update, but that was finished a week ago. He has time to come and answer to the people of Laval, who, again, were robbed by their mayor. I mean their former mayor. Their current one is a good mayor. Their corrupt former mayor stole millions of dollars from people. Today, the Canada Revenue Agency, or CRA, is claiming the money from them. We want the minister to come and explain himself.

Now, Mr. Chair, before I talk about the Dayforce issue, my thoughts turn to the hundreds of thousands of government workers who have been victims of the government's negligence when it comes to the Phoenix system. These are moms and dads. These people went through very painful periods when they had no idea how to fix the problem.

Unfortunately, the managers at the time, 10 years ago, also had no clever way to fix the problem. We're going to talk about billions of dollars and hundreds of thousands of people, but these people are individuals. Behind the numbers are men and women who have suffered and are still suffering.

Before I talk about Dayforce, I'd like to ask you a question, Ms. Reza or Ms. Bogden.

How many cases related to the Phoenix system have not yet been resolved?

[Arianne Reza]

According to the data I have at the moment, there are 88,000 cases that have been in the inventory for over a year. Those are the cases you're referring to. Every month, we try to reduce the backlog. For July, we hope to reduce the number of cases to 76,000.

I would like to add that these reductions represent a 60% decrease from the height of the problem.

[Gérard Deltell, Conservative, Louis-Saint-Laurent—Akiawenhrahk, QC]

Thank you for being concerned about the situation. I want to be frank with you, madam, because this has been a difficult ordeal for everyone, especially for you. I want to express my appreciation for your assessment of the situation and the fact that you recognize that every single case is one too many.

That said, regarding Dayforce, you have shortened the transition timeline by three years. I don't think anyone here wants the Phoenix tragedy to happen again. In my opinion, we shouldn't be focusing on doing things as quickly as possible, but rather on doing them as well as possible.

What assurance can you give public servants that there will be no negative impact related to the Dayforce transition by shortening the transition period by three years?

[Arianne Reza]

Thank you for the question. It is very relevant.

We think about this every day. We want to avoid repeating what happened before.

Our challenge is having two systems running in parallel. Currently, we have one system that covers payroll and 30 human resources systems. It is a burden for us to manage both systems simultaneously. If we see that the new system isn't working, that there are too many risks, we will of course decide to extend the transition period. The challenge for us is to find the right balance. We want to optimize the system while reducing and mitigating risks for employees and the people we pay.