Ottawa eyeing ways to simplify public sector pay rules, fix Phoenix problems

This fall, the government plans to kick off meetings with unions to discuss ways to end an embarrassing situation.

by Kathryn May

Treasury Board is analyzing the biggest pain points in the federal pay system in preparation for an unprecedented round of negotiations with unions. The goal is to simplify the myriad of rules and processes that doomed the disastrous Phoenix pay system as the government races to build its replacement.??

The government plans to kick off meetings with unions this fall to discuss opening existing collective agreements to address these issues. The aim is to make it easier for the new system to pay Canada’s public servants correctly and on time, says Francis Trudel, associate chief human resources officer at Treasury Board.?

The complexity of federal pay is a root cause of the calamities that dogged Phoenix. For years, experts urged the government to simplify its pay rules, processes and practices to avoid the same fate for the pending replacement new system.??

They say the tangle of rules and processes, which required more than 300 customizations, should have been reduced and simplified before Phoenix was built.??

A joint union-management committee was created several years ago to examine issues around a new pay system, but discussions have yet to begin.??

Trudel says Treasury Board, which acts as the government’s employer and general manager, is preparing a diagnosis of the issues and expects to initiate talks by early fall.?

“The unions are right to say that they’re waiting for the employer to call them to the table because we’re finalizing a diagnosis,” he says.?

“The unions are willing to talk. We’re willing to talk. We just need to have a meaningful conversation and, for that, the diagnosis needs to be kind of done in the background.”?

A historic fiasco?

Phoenix was initiated and developed by the Harper Conservatives as a part of its wide cost-cutting measures, although it was officially rolled out three months into the Trudeau government in early 2016. It quickly became one of the biggest public management crises in Canadian history.?

To complicate matters, the public service has grown dramatically over the past five years, with its payroll now exceeding $67 billion annually. That growth generated more pay transactions and glitches, which then landed in a lengthy backlog waiting to be fixed.?

The government has been testing Dayforce – a cloud-based platform for human resources (HR) and pay –?as the replacement. A final government report?concluded Dayforce is a viable option, but there are gaps in the HR and pay functions that it can’t handle. The report found those gaps need to be resolved by simplification, standardization or if that doesn’t work, cloud extensions.?

The big question is whether negotiating new simpler contract provisions or using cloud extensions will be the cheaper and better way to go.?

“The total number of extensions needed for implementation is currently unknown and depends on timelines and the outcome of HR and pay simplification efforts,” the final report concludes.?

A tangle of classifications and rules?

The federal government is the country’s largest employer. But it has 58 collective agreements, 72 job classifications and 80,000 pay rules involving public servants.?

Many of these go back to the 1960s when the then-Liberal government introduced collective bargaining to the public service. Reformers have argued for decades for modernization of a?compensation?and?human resources regime?built for another era.?

Trudel, pay czar Alex Benay and Christiane Fox,deputy clerk of the Privy Council Office, recently committed to building and testing Dayforce this year to replace Phoenix, which increased the pressure to initiate talks with the unions.?

Trudel has two big jobs: simplifying pay in collective agreements and examining ways to standardize practices and change behaviour that has a “downstream impact” on pay.?

Both have created snags that require compensation advisers to manually intervene to fix or finish transactions. Last year, Phoenix churned out 13.1 million cheques, but compensation advisers had to step in to manually complete 1.6 million of those transactions.?

Unions signed a memorandum of understanding(MOU) with the government during the last round of collective bargaining to open up their contracts and guide the talks.?

The MOU includes a wish list of issues that have gummed up Phoenix: acting pay, leave, allowances, annual rates of pay, extra-duty pay, union dues and the inconsistent definition of terms such as what constitutes a “family.”?

The winding road ahead?

But these talks could be fraught with challenges. As much as both sides are committed to replacing Phoenix, a pinch point will be cost. Unions say they are open to changes so long as their members don’t take a hit on their pay or benefits while the government is likely to face public and political pressure to control spending.?

“If they require changes to collective agreements, we’ll certainly consider them as long as our members don’t have to take a concession,” says Sharon DeSousa, national president of the Public Service Alliance of Canada.??

“The government was always able to handle our collective agreements before Phoenix, so if they want to move to a system that requires some changes, we can certainly co-operate in making that happen, but only if PSAC members aren’t going to be asked to pay for it.”?

Unions have argued the easiest way to simplify is for the government to select the most generous entitlement and apply it to everyone.?

For example, for vacation pay, entitlements range from four weeks after eight years of service to five years for others. Overtime rules also vary: some receive double time on Sundays regardless of Saturday work, while others require Saturday work at time and a half first.?

Pay for public servants temporarily acting in a higher role is also a huge headache for Phoenix to process with different qualifying periods depending on the contract.?

In addition, the government offers different allowances on top of salaries, such as retention bonuses, pay supplements for scarce skills, and allowances covering meals, vehicles, travel and work-related clothing such as uniforms, safety boots and glasses. Unions say these allowances could potentially be integrated into base salaries.?

But the idea of paying public servants millions of dollars more to simplify the way they are paid – especially after such a large increase in their overall numbers – might not sit well with Canadians facing an affordability crunch.?

Any increase in funding will also be an issue for the next government, which could be the Conservatives looking to rein in spending. The funding will also have to carry the cost of two pay systems running in tandem for a few years. This year’s cost of improving Phoenix while developing a new system is expected to be $936 million.?

Unions acknowledge the cost could be considerable but argue it may be significantly lower than the ongoing expenses of repairing and maintaining Phoenix, which has already hit $3.5 billion and counting. Phoenix will be around for another five, maybe 10, years because of the complex issues surrounding its replacement.?

Benay is also working with Trudel to standardize practices, introducing “unified actions for pay,” which include seven measures for deputy ministers to implement in their departments.??

For example, the government will adopt the practice of requiring new hires to begin work the day after payday, as most employers do.?

Another measure is standardizing date formats because some departments use year-month-day while others use year-day-month, which can confuse Phoenix.?

Benay downplays concerns that Dayforce will face the same problems because of the complexity that plagued Phoenix.?

So?far, Dayforce has identified 11 cloud extensions to handle most existing pay peculiarities and they will be part of Dayforce’s subscription service, so it will manage and support them.??

However, if rules and processes can be simplified, the new system will be adjusted and there will be no costly customization for the government to maintain.?

Benay adds that technology has come a long way since Phoenix was conceived 15 years ago. If Amazon can pay its employees with multiple scales in different time zones and jurisdictions around the world, why can’t the federal government???

“Our operations are complex, but not any more so than any large multinationals or other foreign governments . . . yet these governments pay their employees accurately and on time,” he says.??

This article was produced with support from the Accenture Fellowship on the Future of the Public Service. Read more of?Kathryn’s articles.??