Ottawa invests $135 million in Phoenix pay system replacement

Feds say they have 'no intention of… making the same mistake'

Ottawa invests $135 million in Phoenix pay system replacement

The federal government is setting aside $135 million under Budget 2024 to boost the development of Dayforce – which is expected to replace the problematic Phoenix pay system within the next few years.

Alex Benay, the federal official responsible for the project, confirmed this development to Radio-Canada, according to CBC.

"We had really good news, in the sense that the government trusts our plan,” he said.

The budget allocation for Dayforce is $25 million annually, according to CBC.

In February, Public Services and Procurement Canada found that Dayforce presents a technically viable option for the federal government’s next modern HR and pay system.

What went wrong with the Phoenix pay system?

The Phoenix pay system is used to deliver pay to an average of 420,000 current and former employees bi-weekly. In 2023, this represented approximately 13.1 million payments, totalling roughly $36 billion, according to the federal government.

One of the complexities of Ottawa’s HR and pay environment is the challenge of applying almost 150 different collective agreements representing employees from over 100 departments and agencies.

As of April 24, 2024, there were 425,000 transactions to be processed for client departments and agencies in the system, according to the federal government.

Nearly three in four (74%) of these transactions are “outside service standard,” including 213,000 transactions that are over one year old.

Source: Federal government

"We have no intention of disintegrating [the payroll and human resource management systems] a second time and making the same mistake," Benay said in the CBC report.

In February, On the eighth anniversary of the launch of the Phoenix pay system, three unions called on the federal government to provide additional compensation for damages to workers who have been impacted by the system’s troubles.

Benay also said that Phoenix's software likely will become obsolete in the coming decade, which increases the pressure to build a new pay system.

AI, help from unions for designing, testing new system

Ottawa will use artificial intelligence (AI) tools to clean up the data in the Phoenix system and reduce the number of late payments, CBC noted. 

The government will introduce Dayforce gradually in several federal departments to make for a smooth transition. 

However, while certain compensation rules could be standardized across government to ease the transition to a new pay system, unions should help design and test the new system., according to the Public Service Alliance of Canada (PSAC).

"If the members don't suffer, we're ready to co-operate in setting up a payroll system that works," said spokesperson Yvon Barrière in the CBC report. "But we need to be certain that the system will work, and that it will not disadvantage our members under collective bargaining agreements."

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