Phoenix Pay System Slowly Coming to an End, with an Additional $1 Billion Price Tag

For a decade, we’ve been hearing, with almost comical absurdity, problems with the Government of Canada’s beleaguered payroll system, Phoenix. It’s been responsible for thousands of people being underpaid, overpaid, or worse, not paid at all. Just as problematic, it’s been responsible for massive cost overruns that have ballooned over the years to fix catastrophic problems with its design. According to Alex Benay, the Associate Deputy Minister of Public Services and Procurement, we may be nearing the end of the road for Phoenix, with the caveat that the backlog of unresolved issues needs to be cleared and its replacement tested appropriately to ensure this doesn’t happen again.

While Phoenix’s failures have been exceptionally well-documented over the years, here’s a quick refresher. In 2009, the Conservative government, under Stephen Harper, was trying to streamline public service pay systems while saving the government money. $300 million was set aside to do this, with a $122 million project approved to centralize pay administration for most federal departments, and another $186 million to create a new payment system. By implementing a new pay system (Phoenix), the expectation was that the Federal government would save millions by eliminating positions that would be made redundant and automating pay processes. The system would launch, in full, in 2016, despite concerns shared with Public Services and Procurement Canada through independent audits about the viability of the system. It would then go on to explode in costs due to serious long-term deficiencies, with current estimates putting the cost of the system somewhere around $3.5 billion.

The system was riddled with errors to such a catastrophic extent that, by some estimates, over half of federal public servants have experienced issues directly related to the Phoenix pay system. The current backlog of transactions is huge, standing at an astonishing 416,000 ready to be processed as on June 19th. Half of the transactions, 212,000, are over a year old, half of which are complex problems that require direct human input that Phoenix can’t in itself fix. Those unresolved transactions will need to be finalized before the new system can be put in place. The goal, according to Benay, is to process all backlogged transactions by March of 2025.

The federal government has estimated that they will spend an additional $936 million over the course of the 2024-2025 fiscal year. Approximately half of this money is to continue supporting Phoenix through this process and to alleviate the backlog, and the remainder will be to test and develop the new system, Dayforce. Benay has stated that, based on internal and external reports, the issues surrounding Phoenix were a result of having separate systems for HR and payroll, as well as the lack of a central pay hub, as various government departments have separate compensation systems, with Phoenix unable to adapt to meet the needs of each department.

As for Dayforce, what is to prevent the new system from becoming a boondoggle like Phoenix? Benay has stated that the government will run into a situation where they are running both Phoenix and Dayforce to ensure a smooth transition to the new system. “We’re talking about three to five, six years worth of work to get to an end state,” said Benay. “We will be with the current system for quite a while.” A fully costed plan as to how the government intends to implement Dayforce is expected by the end of this year.

For public servants, particularly those who have already been “burned by Phoenix,” it may be a small comfort to know we are transitioning to a new system. For those who are anxious for the Federal government to save money by ditching Phoenix, it seems like we are stuck with it until we know for certain that Dayforce is the right solution to replace it. And we need to be sure it is, because replacing Phoenix cannot end with another boondoggle. When former Auditor General Michael Ferguson examined the implementation of Phoenix, he called it “an incomprehensible failure of project management and project oversight.”

We cannot allow the government to make the same mistake again.