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Replace Phoenix? New federal pay system could cut annual costs in half, budget office report says

PSAC members protest the Phoenix pay system on Laurier Ave in Ottawa Thursday, Feb 28, 2019.
PSAC members protest the Phoenix pay system on Laurier Ave in Ottawa Thursday, Feb 28, 2019. Members demand action from the federal government because of the Phoenix pay system. - Tony Caldwell
OTTAWA, Ont. —

The federal government can cut in half the costs associated with paying its employees by introducing a completely new pay system to replace the disastrous Phoenix project, a new report suggests.

In a report issued Tuesday, the Parliamentary Budget Officer (PBO) said that replacing the Phoenix pay system is a high-risk project, but one worth the reward — provided it’s done right.

Other governments, the report found, pay vastly less that Canada to issue accurate paycheques to their employees.

A 2015 survey by Bloomberg BNA found that five government agencies, mostly in the United States, paid an average of $270 per employee to manage their pay systems.

The most expensive system of the five cost $540 per employee.

The Canadian government, by contrast, paid a whopping $1,073 per employee in 2017-18 to manage the error-prone Phoenix federal pay system.

Even the system that Phoenix replaced, the low-tech Regional pay system, was relatively expensive at $681 per employee.

The PBO estimated that a new federal pay system can cut the cost to $340-352 per employee.

“Our estimates therefore suggest it is possible to realize savings on pay administration provided the right software is chosen and its implementation is well executed,” concluded the report entitled, ‘Costs Associated with Replacing the Federal Pay System.’

The report noted: “The success of a new system depends on two factors: the correction of all pay file data before implementation, and the procurement of a system that has all the capabilities required to process federal pay.”

Any new pay system must be able to handle the federal government’s vast array of pay rules, scheduling issues and bargaining units.

The federal government had about 80,000 pay rules in 2006-07, but no one knows exactly how many exist today.

The Treasury Board of Canada Secretariat is now undertaking a project to count them, the PBO report revealed.

Overall, the PBO estimates that it will cost $57 million to procure, test and ready a new software system to manage the pay of government employees.

If that software and training is in place by 2023-24, the government will pay between $101.9 million and $105.7 million each year to operate the new system.

The PBO warned, however, that it was unable to estimate the cost of customizing a new pay system so that it could handle the government’s “astonishing” number of pay rules. (Under some collective agreements, for instance, an employee is allowed to claim acting pay if they replace a manager for as little as 15 minutes.)

It’s expected to take several years to fully test and implement a new system, which is likely to be rolled out in stages.

That process has to take place at the same time the federal government invests in fixing the Phoenix system — and correcting the multitude of pay mistakes that have left civil servants deeply frustrated.

The latest statistics show that the public service pay centre, tasked with sorting out the mistakes, still faces a backlog of 248,000 transactions.

Current estimates suggest Phoenix could take five years and $2.6 billion to fix.

In a report last year on the fiasco, former auditor general Michael Ferguson said a small management team within Public Services and Procurement Canada failed to obtain independent advice about the system, paid little heed to the concerns of end users, ignored mounting risks, stripped key software features from the system when faced with escalating costs, and failed to test the system as a whole.

The error-prone system has spared few civil servants.

Based on a survey of its members, the Public Service Alliance of Canada estimates that 90 per cent of federal public servants have been affected by mistakes on their paycheques: overpayments, underpayments and other errors.

The federal public service has 273,000 employees, about 41 per cent of whom work in the National Capital Region.

The federal government has reached a tentative agreement on a Phoenix compensation package with unions that represent 146,000 current and former public servants.

The Public Service Alliance of Canada, however, has rejected the proposal as too meagre and inequitable since it offers more compensation to higher paid employees.

The proposed deal offers federal employees five days of paid leave over the next four years as compensation for the general damage caused by the Phoenix pay system. If the offer is ratified, public servants will be able to take the paid leave in time or money.

Copyright Postmedia Network Inc., 2019

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