Federal pay administration: Standing Committee on Government Operations and Estimates—March 12, 2020
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Collective agreement implementation
In this section
In line with the minister’s mandate letter, the Government of Canada is committed to helping rebuild public servants’ confidence in the integrity of the government pay system. Public Services and Procurement Canada (PSPC) is working with the Treasury Board of Canada Secretariat (TBS) to identify options that will ensure the next round of collective agreements is processed in an efficient and timely manner.
- The government is committed to implementing collective agreements in a timely manner
- PSPC has dedicated compensation advisors working to process these payments as quickly as possible
Current status regarding 2014 and 2018 collective agreements
- For the 2014 round of collective agreements, there are currently 123 TBS and separate employer’s agreements and salary rate updates that have been processed, representing more than $2.2 billion in payments to employees.
- To ensure retroactive payment amounts are accurate, PSPC is conducting a review of payments to employees in all groups.
- In August 2019, the first of the 2018 round of collective agreements were signed. The implementation of a number of these collective agreements is underway
- Lessons learned from the implementation of the 2014 round of bargaining allowed PSPC to collaborate with departments, agencies, and bargaining agents to simplify processes, improve accuracy of payment and reduce the need for manual work
The 2014 round of collective bargaining
The department continues to implement the 2014 round of collective bargaining (27 collective agreements where the Treasury Board of Canada Secretariat is the employer, and 62 for separate employers, have been signed between early 2017 and September 2019). It is anticipated that this work will be completed by fall 2020.
In collaboration with TBS, the department has developed a collective agreement implementation schedule that establishes the order of priority for the completion of outstanding work for all signed collective agreements. This prioritization framework takes into consideration legislative responsibility, compliance orders and contractual obligations.
Collective agreement implementation post-validation exercise
In November 2017, the Public Service Alliance of Canada filed a complaint with the Federal Public Service Labour Relations and Employment Board. The board ruled that the employer failed to meet timelines for the implementation of collective agreements for 4 work groups and directed that payments be verified for the Public Service Alliance of Canada.
In the spring of 2019, the department temporarily reallocated compensation resources from working on the overall queue to focus on the 2014 collective agreement implementation post-validation exercise. This was done in order to meet the set September 2019 deadline to complete the post-validation cases for the Program and Administrative Services Group (PA) group. Thanks to these efforts, all of the PA group post validation accounts were processed by the deadline set by the board.
The post-validation exercise involved reviewing automatically processed collective agreement cases that had been flagged for further manual processing. Overall, 91% of employees have been fully paid, as of February 21, 2020. The work will continue for remaining groups until fall of 2020.
The 2018 round of collective bargaining
To facilitate the implementation of the 2018 round of collective bargaining, the department and TBS have undertaken a new automated mass retroactive process for the implementation of 2018 collective agreements.
This new process has been endorsed by other employers and bargaining agents. The new implementation process calculates retroactive payments on a percentage basis. This approach helps significantly reduce the need for manual intervention and ensure that employees receive their salary update and a retroactive payment within the established deadline. Manual work for the implementation of the 2018 round of bargaining is estimated to be less than 10% of the volume related to the 2014 round due to system improvements.
The department developed a schedule for implementation of the 2018 round of collective agreements that have been signed to date with a view to avoiding penalties for late implementation. We note that there will still be some penalties paid to a number of employees until the fall, since we are adding further automation to the system.
Questions and answers
Question 1: When can employees expect to receive their retroactive payments for the 2018 round of collective agreements?
Answer 1: In August 2019, the first of the 2018 round of collective agreements were signed. The implementation of a number of these collective agreements is underway. To date, 96,000 employees have received payment, totaling $264M.Timelines for implementation is based on negotiations for each collective agreement. Employees will be paid a lump sum retroactive payment based on a percentage increase in their rate of pay. This will cover the period from the start date of the new collective agreement to the day that new salary rates take effect in the pay system.
Question 2: How does the new mass retroactive process differ from the old one?
Answer 2: The new mass retroactive approach significantly reduces the need for manual work, limiting opportunities for error.
With this approach, PSPC updates the employee’s rate of pay in the pay system, then pays the percent difference between the old and new rates. The calculation in the system is based on a snapshot of the employee’s pay at the time the salary rate is entered.
Question 3: What is being done to ensure accuracy of retroactive payments?
Answer 3: To ensure retroactive payment amounts are accurate, PSPC is conducting a review of payments to employees in all groups. Lessons learned from the implementation of the 2014 round of bargaining allowed PSPC to collaborate with departments and agencies, and bargaining agents to simplify processes, improve accuracy of payment and reduce the need for manual work.
- The accuracy of retroactive payments depends on the employee information in the system at the time when PSPC runs the retroactive payment process for each collective agreement. PSPC is working with departmental and agency HR employees and compensation advisors to ensure clean employee data
- The department is responsible for implementing pay and benefit changes for public servants that result from new collective agreements. All signed collective agreements are run through an automated process
- PSPC identifies situations where manual intervention may be necessary because the file is too complex to use the automated process
- The Pay Centre completes any residual manual work needed to process revised payments, often as a result of complexities behind automation capacity
In relation to the 2014 round of collective bargaining, as of September 2019, collective agreements and salary rate updates for 123 TBS and separate employers’ classification groups have been processed, and more than $2.2 billion has been paid out to employees. This has created a significant work pressure for compensation staff, yet concurrent progress has still been made on reducing the queue of pending pay transactions.
Given the complexity of this work, some payments are still outstanding. As well, the department is conducting a post-validation exercise to review payments to employees in all groups and to ensure retroactive payment amounts are accurate.
2020 tax-filing season
In this section
The Government of Canada is committed to addressing tax issues as they arise during the year. This includes issuing amendments for previous year tax slips, and resolving emerging tax issues, all as part of Phoenix’s regular payroll processing schedule.
- The 2019 year-end tax plan included clear direction on robust testing, completion of dry runs, quality and integrity verification of data, implementation of the tax updates, as well as communication of year-end information to the compensation community and employees
- Tax slips for 2019 were released to federal employees on a staggered schedule before the end of February 2020
- Public Services and Procurement Canada (PSPC) continues to actively work with departments and agencies to communicate with employees who may receive amended tax slips because of outstanding issues with their pay file
Applying the lessons learned from previous tax seasons resulted in a successful 2019 tax-filing season with fewer data issues, no major system issues and fewer inquiries from clients, when compared to the previous 2 years.
Preparations for the 2020 tax-filing season were also based on the lessons learned from previous years to ensure another successful tax season. The department completed data error analysis, review, development and implementation of any system changes, as well as preparation of implementation critical checklists and dress rehearsals of tax slip production.
During the third week of February, information on the release of 2019 tax slips (T4s and Relevé 1) was shared with departments and agencies. Tax slips were made available to federal employees on a staggered schedule between February 21 and February 26, 2020. This approach helped prevent system delays that could have resulted from a large number of users logging in to Phoenix at the same time. It also ensured that access to the system continues to be available for other transactions, such as approving employee transactions and work at the Pay Centre.
Additional communications are planned for the second week of March, detailing information related to the amended tax slip schedule (accessible only on the Government of Canada network). Information will be shared with departments and agencies both through the change agent network, as well as external communications products (social media, and corporate communications).
Preparation for the tax season is a year-long activity structured to produce and deliver accurate tax slips from Phoenix to over 300,000 Government of Canada employees, by the legislative deadline of the last day of February each year. There are 4 main streams of activities:
- review of the systems configuration and execution of dress rehearsals to test year-end programs and confirm readiness of Phoenix to produce tax slips
- implementation of year-end system changes related to any legislative changes
- correcting account data to ensure accuracy of tax slips (such as reporting overpayment amounts), thus reducing the number of tax slips amendments required
- communication of key information to all Government of Canada departments and agencies using Phoenix ( for example, communication of deadlines for submission of transactions)
Changes to Phoenix are limited from mid-November to mid-March each year to avoid additional stress on systems during year-end system preparation and testing activities. This approach proved effective for the 2019 tax-filing season.
The department continues to address tax issues as they arise during the year. This includes issuing amendments for previous year tax slips, and resolving emerging tax issues, all as part of Phoenix’s regular payroll processing schedule.
Questions and answers
Question 1: What is the government doing to support employees experiencing tax issues as a result of Phoenix?
Answer 1: Employees are being informed of the steps to take if they think that they have an error on their tax slips. Where needed, amended tax slips are issued to correct any errors.
We continue to work with Canada Revenue Agency (CRA), Revenu Québec and Treasury Board Secretariat (TBS) to provide ongoing support to employees experiencing tax issues as a result of Phoenix.
Among these measures, the government will reimburse expenses up to $200 per year, related to obtaining tax advice. Similarly, anyone who incurred out-of-pocket expenses because they were underpaid can also submit a claim.
Changes were also made to the Income Tax Act so that overpaid employees do not face additional financial burdens. The changes allow affected employees to repay only the net amount of the overpayment received in a previous year, rather than the gross amount.
Question 2: What are the implications of the change to the Income Tax Act on Phoenix?
Answer 2: On January 15, 2019, the Department of Finance announced draft legislation to permit affected employees to repay to their employer only the net amount of the overpayment received in a previous year, rather than the gross amount. This ensures that overpaid employees do not face financial burdens.
The proposed tax legislation changes were tabled in the House on April 8, 2019, and related changes have been implemented in the Phoenix pay system. These legislative changes apply to overpayments that have not already been processed under current rules.
However, if an overpayment amount is recorded in Phoenix outside this 3 year threshold, the new tax legislation does not apply and the employer is required to deduct, and remit to the Receiver General, the appropriate tax withholdings on any salary and wages paid regardless of whether the amount was paid in error.
Overpayments recorded in Phoenix will generate an amended tax slip to reflect the adjusted earnings. The amended tax slip will be considered when an annual income tax return is reassessed, where a refund of tax withholdings may be issued.
Phoenix IBM and systems upgrades
In this section
The minister has been mandated to support the minister of Digital Government on the next generation pay and human resources system to replace the Phoenix pay system. This note focuses on vendor support on the Phoenix file (IBM / innovation challenge) as well as the Phoenix pay system software upgrade (PeopleSoft 9.2).
All questions related to next generation pay solution should be directed to the president of the Treasury Board.
- The Government of Canada is committed to supporting employees and resolving public service pay issues as quickly as possible
- We are reaching out to experts, federal public sector unions and the private sector for innovative solutions to help stabilize the pay system
- As part of its continued efforts to stabilize the pay system, the department is proceeding with a Phoenix pay system software upgrade from PeopleSoft 9.1 to 9.2
- The upgrade to PeopleSoft version 9.2 will ensure that Public Services and Procurement Canada (PSPC) continues to receive software patches, fixes, and tax rate updates that Phoenix requires to generate payroll accurately
- Based on lessons learned from the Phoenix rollout, various governance committees were put in place to provide ongoing input and recommendations to PSPC to ensure effective decision making throughout the upgrade project
- This upgrade will not affect or require upgrades to the PeopleSoft application that government employees use to submit human resource (HR) transactions such as leave requests
- The overall upgrade is expected to take approximately 24 months (including the planning phase) with a target go live in spring 2021
Background and current status
IBM Canada Ltd contract and amendments
In June 2011, IBM Canada Ltd was awarded the contract for the new pay system through an open and transparent bidding process. Since then, there have been 47 amendments to the original contract, for a total contract value of $407.5M (taxes included). Amendments are a regular part of the contract management process and were anticipated at the time of contract award.
The most recent amendment was issued in November 2019, and was required to purchase software licenses and to continue receiving maintenance and support services essential for pay stabilization. This also includes the upgrade of the software used by the Phoenix pay system to PeopleSoft version 9.2.
Since the original contract was issued, the Crown has moved toward an application managed service model which is an industry standard designed around outcomes-based contracts. This means that the work under the contract is considered complete when certain outcomes have been achieved, regardless of how much work is required to achieve that outcome.
This change in contracting model means that IBM is taking on an enhanced role in delivering more of the day-to-day operations and responsibility for risks associated with pay administration. This allows the department to focus the vendor’s efforts on daily transactions and free up public servant subject-matter experts to focus on strategic improvements and processes.
Benefits seen to date:
- the end-to-end process to operate the Phoenix pay system is now fully documented, which has contributed toward the stabilization of payroll processing
- the number of IBM resources has increased, strengthening payroll operations
- specifically, IBM has 152 functional resources and 43 technical resources providing 24 hour support, 365 days per year
- as part of the fixed price contract, IBM ensures the continuous onboarding and training of staff to meet the outcomes identified, and the contract costs are not impacted
- improvements have been made to backend system processes through the introduction of automation, database processing performance, and pay processing
- more performance metrics are being calculated and tracked
The current application managed service contract with IBM Canada Ltd. will end on March 31, 2021. It has an option year until March 31, 2022 which provides the Government of Canada a transition period towards a future state.
In service support: Re-procurement
In May 2019, a request for information was posted on Buy and Sell to gauge industry interest and capacity to provide services for ongoing operational maintenance and support, followed by an Industry Day in June 2019 with private sector vendors. Ongoing engagement with industry is key to ensure fair and equal opportunity to all interested suppliers and a successful procurement process. To maximize the market response, the department is incorporating lessons learned from previous industry consultations in this area.
The department intends to pre-qualify suppliers as part of the initial phase of the re-tendering process. Public Services and Procurement Canada will issue an invitation to qualify (ITQ) in April 2020. This process will determine if there are private sector organizations that are interested and can meet the selection requirements to provide support services for Phoenix.
Phoenix system upgrade: PeopleSoft 9.2
The upgrade to PeopleSoft 9.2 will ensure that PSPC continues to receive software patches, fixes, and tax rate updates that Phoenix requires to generate payroll accurately.
The PeopleSoft 9.2 upgrade consists of implementing a new version of the PeopleSoft application with limited impact and disruption to operations and users. The scope of the project is limited to the pay system (Phoenix) and does not include upgrading the departmental HR systems. Extensive testing is currently being performed with departments and agencies to ensure that employees’ pay is not impacted when the upgrade is launched.
- Public Services and Procurement Canada estimates that the overall upgrade is expected to take approximately 24 months (including the planning phase) with a target go live in spring 2021. Through budget 2018, the department secured $22.1 million in funding for the upgrade to PeopleSoft 9.2
Notice of proposed procurement
PSPC launched a procurement process in August 2018 to engage the private sector in innovative solutions to help stabilize the pay system.
Industry has been consulted in several areas identified as key to reaching stabilization. These are: robotic process automation (RPA), HR processes, lowering the queue, improving user experience, enhanced user access management, training, and accelerator services.
- Robotic process automation: 2 contracts were awarded in March 2019. A contract extension was awarded to KPMG on November 8, 2019 for Phase II work. This involves implementing the solutions that KPMG proposed under Phase I to automate manual pay processes
- Lowering the queue: 2 contracts were awarded in May 2019
- Accelerator services: a contract was awarded in February 2020
- PSPC is currently re-evaluating the remaining challenge categories against current and future requirements
Questions and answers
Question 1: Why does the government continue to invest in Phoenix and extend the IBM contract?
Answer 1: The government has signaled its intention to move to a new pay system, but this transition will require several years. In the interim, the government must still pay its employees. Ongoing efforts to stabilize the pay system and enhance effectiveness to support timely and accurate pay require sustained investments in Phoenix.
Question 2: What does the Phoenix system upgrade to PeopleSoft 9.2 entail?
Answer 2: The PeopleSoft 9.2 upgrade consists of implementing a new version of the Phoenix PeopleSoft application with limited impact and disruption to operations and users. This upgrade will not affect or require upgrades to the PeopleSoft application that government employees use to submit human resource (HR) transactions such as leave requests.
Extensive testing is currently being performed with departments and agencies to ensure that employees’ pay is not impacted when the upgrade is launched. Testing of the upgrade includes running payroll processes on both Phoenix PeopleSoft versions 9.1 and 9.2 at the same time to ensure that pay information is not impacted.
The overall upgrade is expected to take approximately 24 months (including the planning phase) with a target go live in spring 2021.
Public Services and Procurement Canada secured $22.1 million in funding, through budget 2018, for the upgrade to PeopleSoft 9.2.
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