Glen McGregor, host: To mark the eighth anniversary of the launch of the Phoenix pay system, the leaders of three public service unions came to Parliament Hill this February. They held a press conference to try to draw attention to what, incredibly, was still an ongoing problem.

[Soundbite of a press conference held by public service unions]

Chris Aylward: This week marks the eighth anniversary of Phoenix. Unfortunately, eight years into the pay fiasco, there is nothing to celebrate, no light at the end of the tunnel. Since the launch of Phoenix in 2016, there hasn't been a single pay period without issues. Paycheque after paycheque, workers are still facing constant stress and anxiety, wondering if they'll be paid. That's why we're here today.

McGregor: That’s Chris Aylward, head of the Public Service Alliance of Canada. The issue that he and other unions wanted to highlight at their press conference was compensation. In 2019 and 2020, the federal government reached agreements with the unions to compensate their members for the difficulties Phoenix had caused. Compensation would vary by agreement and the degree of hardship encountered. Aylward's group agreed on a lump-sum payment of up to $2,500 as general damages for employees who were paid through Phoenix.

But that was four years ago. The compensation agreements only covered damages up to 2020. Now, in 2024, Phoenix still isn't fixed. As of the end of March, the backlog of pay centre transactions stood at over 400,000. About half of those had been in the queue longer than a year. Phoenix is, at the time of this podcast, still a problem.

[Soundbite of a press conference held by public service unions]

Aylward: These agreements covered distress, aggravation and hardship members endured from 2016 to 2020. But since then, the pay problems have never stopped. For the past four years, workers have continued to suffer because of a broken pay system, with no compensation from their employer for the harm caused — and there's still no end in sight.

McGregor: The message the unions delivered to the federal government: come back to the negotiating table and hammer out additional compensation agreements for those who have been affected since 2020. People like those described by Nathan Prier. He’s head of a union called the Canadian Association of Professional Employees.

[Soundbite of a press conference held by public service unions]

Nathan Prier: So our members are suffering from this failure and the consequences are all consuming. One of our members had more than $100,000 clawed back as the government claimed back their gross pay, not their net pay. They were granted no financial relief. Another member had to remortgage their house to repay their overpayment, while at the same time being underpaid and on disability.

So the reality of what this means can't be forgotten and can't be understated. Marriages have broken down because of the immense financial burdens. Every Phoenix case might represent someone who now has to struggle to buy groceries, to pay rent or just to live. One case is too many, but the ongoing scale of the Phoenix disaster is horrific.

McGregor: The union complained that the government was putting too many of its resources into collecting overpayments from people who were wrongly paid too much because of Phoenix — and not enough helping those struggling to pay their bills. They believed that clawing back overpayments had become a priority for the federal government because of looming deadlines. 

Under something called the Crown Liability and Proceedings Act, the government is barred from taking legal action to collect overpayments made more than six years prior, a kind of statute of limitations. If someone was overpaid by a Phoenix error in, say, July of 2016, the government would have to collect by July 2022.

To help reduce the lingering Phoenix backlog, the union leaders called on the government to hire more compensation advisors. And they warned against repeating the mistakes of Phoenix as the government sets out to replace it with a brand new pay system. 

[Soundbite of a press conference held by public service unions]

Aylward: We don’t know if it even works, and we're gonna just scrap the old pay system? That's not good.

McGregor: In ancient Greek mythology, the phoenix was a bird that would die in a blaze of fire before a new one was born from the ashes. The payroll system that shares its name with the mythological bird has failed so many civil servants. Is it time to burn it down? And what will rise from the ashes?

I’m Glen McGregor. I’ve been an investigative reporter in Ottawa for more than 25 years. This is Phoenixed: Inside Canada’s payroll disaster, produced by the Global Payroll Association and Storythings. 

Graham Jenkins: When I read about the project — with no good feeling, it's not a feeding frenzy for me. It's, you know, you read it with sadness.

Alex Benay: We will not do another big bang, and we will do this incrementally. 

Justine Janssen: They're coming from a really tough situation as they move forward, and we'll want to do that thoughtfully. 

McGregor: Episode 6, “From the Ashes.” A few weeks before the unions held their Phoenix anniversary press conference, the Canadian government made a major announcement about its payroll system. It put out a press release that said it was making progress in testing a new platform that could one day replace Phoenix. 

For the past two years, Public Services and Procurement Canada has been trying out software developed by a Toronto- and Minnesota-based company called Dayforce, formerly known as Ceridian. The company provides a SaaS — that is, it uses a Software as a Service model — and is hosted in the cloud. 

The Dayforce system was tested in 5 government departments to see how it would perform. The evaluation of the deployment, what the government called a “final findings report” released in February, concluded Dayforce is a “viable option,” with several “but’s.” There needs to be a simplification and standardization of HR rules across departments and agencies. That is, for the system to succeed, the government needs to simplify and change policies and renegotiate collective agreements to avoid another Phoenix debacle. 

And the evaluation said more testing is still required. The government's HR and pay transformation has been a difficult task for more than four decades. I'm quoting from the findings report here: “This challenge stems from the fact that the [Government of Canada] does not operate as a single employer. The federal public service is a complex enterprise made up of over 200 distinct organizations and roughly 380,000 people.”

So, more work is still required, but those are some promising early results for NextGen HR and Pay — the government's name for the initiative to explore a new system. This should have been a good news story for a government rocked by the Phoenix scandal. But this was largely ignored by Canadian journalists: many of them were reporting on a new government IT project that went off the rails. One that would invite comparisons to Phoenix.

[Soundbite of a press conference held by the auditor general]

Karen Hogan: So I've been the auditor general for almost four years now, and I would tell you that this is probably some of the worst financial recordkeeping that I've seen; the lack of basic information to support an invoice and know where to assign it in your books, so that you can have accurate tracking of a project. And when it comes to all the other processes, it is really glaring, some of the most basic things that we’re missing here. 

McGregor: That’s the new auditor general, Karen Hogan, who is a kind of a spending watchdog for government programs that report back to Parliament. She was talking about an app called ArriveCAN. It was released by the federal government during the COVID-19 pandemic. It was supposed to make it easier for travellers arriving in Canada to share their contact and health information with the government. The data from travellers arriving in the country, including Canadians coming back home, was used to determine who had to go into quarantine.

Some people opposed to vaccine mandates hated the app. They called ArriveCAN an unwarranted intrusion into their privacy, an overreach by the government. Some travellers were fined for refusing to use the app at border crossings. Others filed lawsuits that went mostly nowhere. The government eventually dropped the requirement for travellers to use ArriveCAN. But late in 2023, media reports emerged about problems with its development, and the auditor general’s report on ArriveCAN put a renewed focus on government IT practices. 

The leader of the opposition said that the ArriveCAN scandal shows the government has become too dependent on outside IT consultants. More work should be done in-house, Conservative leader Pierre Poilievre told journalists.

[Soundbite of a media scrum]

Pierre Poilievre: We want to cut back on outside consultants because public servants do the work more accountably, and they do it more affordably. So we're gonna save money by reversing Trudeau’s doubling of outside consulting fees. Thank you. 

Unidentified reporter #1: The auditor general found that the civil service didn't have the skills to do this kind of work. So wouldn't you need to train them, and wouldn't that cost money, sir?

McGregor: Like Phoenix. That didn’t go so well.

Poilievre: But there were contractors involved in Phoenix as well.

McGregor: That’s me trying to ask a question about Phoenix, another large IT project. Poilievre’s remark was likely intended to score points on the Liberal government; it was not an analysis of the Phoenix debacle. The outside contractor who designed software for that project, as we’ve discussed, was IBM. And the consensus was that Big Blue wasn’t really the problem.

Still, I reached out to IBM Canada to request an interview about Phoenix. We’ve already heard from IBM executives who appeared before a parliamentary committee, but I wanted to speak to them directly about the project. IBM declined my request and suggested I get comment from the government instead.

The government official I wanted to talk to the most was Jean-Yves Duclos. He’s an economist-turned-politician and is now the minister responsible for Public Services and Procurement, the department in charge of Phoenix. Duclos’s press secretary had proposed a date for an interview with the minister, but his staff later called up to cancel. That was around when the ArriveCAN story exploded. Scheduling problems, they said. It seems that IT was getting politically prickly for the government, once again.  

Duclos’s department did put me in touch with a public servant overseeing the NextGen HR and Pay project. That is, the initiative to find a replacement for Phoenix. 

Benay: My name is Alex Benay, I'm the enterprise pay coordinator for all things pay for the Government of Canada.

McGregor: Excuse the audio quality here. Their communications team insisted we speak on a conference call. Benay had worked in government before, but left and took a job in the private sector. He joined PSPC last summer. A big part of his job was trying to learn the lessons of Phoenix.

Benay: We spent the last six, seven months reviewing every external report, and that’s formed the core of what we're trying to solve.

McGregor: One of his big takeaways is that the Phoenix debacle was not just about payroll. 

Benay: It's not just a pay problem. It's an HR problem. It's a data problem. It's a management problem. So this situation of ours has multiple facets that we're going to have to address.

McGregor: You talk about the need to not repeat the mistakes that were made with Phoenix. In your view, what were the biggest of those mistakes? What was the problem with Phoenix that caused all these problems?

Benay: I think there are some things that are pointed out in publicly available reports, right? So we’re one of the few organizations in the world to have separated PeopleSoft HR and pay. So we know we have to, in the future, bring our HR solutions and our pay solutions closer together. 

McGregor: So lesson one, do a better job integrating payroll and HR. 

Benay: So that's what we're testing with the central data management platform. That's why we're testing a single HR and pay platform. So we're aware, obviously, in a very painful way, being aware of some of those shortcomings. And now the goal is to make sure that we did all the strategy and recommendations into the spring that meet those needs.

McGregor: Something that's come up repeatedly as I've done this podcast is the complexity of pay across the entire federal government range of departments and agencies. Everybody's got their own special rules, and that may have been kind of the contributing factor to what happened with Phoenix and why it went so wrong. And whoever comes in to rebuild or build a new system is going to have to deal with those things. The final findings report talked about the need for simplification and standardization. That sounds good, but that's the hard part, right? Tell me about how that's gonna — it's not just a software problem, it's getting all the rules, everybody on the same page. How are you going to do that?

Benay: Yeah, that's a great point. Like, this is such a multifaceted problem. It's absolutely a technology problem, but it's also a business problem. So the last six months for us have been about working with seven departments to actually be in a room and start standardizing process, and see if we could ourselves get to an agreement on standardization of some of these processes — because there's no point going down a technology road if we can't standardize ourselves. So the last 6 months have been as much about stress testing Dayforce as they’ve been about stress testing, “Can we get on the same page from a process and a standardization?” So far, by putting both technology and business in the room together, the results have been pretty good. 

McGregor: You've done five departments with fairly promising results, at least according to the final findings report. What's the next step? Do you take on five more? Or do you add 50 more? I mean, do you do this incrementally, or do you go for a government-wide solution now that you've shown that this, using a SaaS approach, might work?

Benay: I've approached this personally in the mindset of “we will not do another big bang, and we will do this incrementally.” I want us to be like astronauts. Astronauts train and fail every day in their training programs in small increments, until it's time to go up into space and they're ready to address either issues or conduct a mission successfully. We have to approach it from the same perspective. We have to fail fast and in small increments and adjust, to avoid ever returning in the same situation that we put ourselves in in the past.

McGregor: An incremental transition to a new system. But the problems with Phoenix continue to affect public servants. And they want to know: When will it all be fixed?

Benay: We realize that everybody needs to get paid the right amount in a timely fashion. I think we've been able to make some progress, right? We have introduced a lot of robot process automation, but we recognize there's still a lot of work to do. In part, we can't get there because some of the technology we have put in place doesn't work very well for our compensation advisors, and that’s what we have to address as we standardize HR across government.

So the message there is, we are working extremely hard on fixing the current platform to a state where it continues to be better. Our cases where people are not getting paid are decreasing, but it doesn't mean that there are no issues, obviously, as we've stated. And what we're now trying to do is figure out the path moving forward so that we can standardize and move to new technology, and make sure that we don’t replicate the mistakes of the past while we make sure we're addressing the current needs of employees as we speak. If the decision is made to proceed with Ceridian, well, this will take many years because we will do it properly.

McGregor: So, many years to do it properly. Payroll transformation is — and will continue to be — a long-haul project for PSPC and for Dayforce, if they’re ultimately selected. To understand how the search for a new system has been going and where it's headed, I sat down with a Dayforce executive.

Janssen: My name is Justine Janssen, and I'm the chief strategy officer at Dayforce. We manage everything from hire to retire: HR, payroll, benefits, talent management, really everything you need to manage your workforce in a single application, with a single database.

McGregor: Tell me about what you're doing for the federal government now on HR and payroll. 

Janssen: Yep, so we’ve spent several years partnering with the federal government working through validating that the solution can meet their needs for NextGen HR and Pay. And so we've worked with them to validate a number of different requirements across a handful of their departments, just to really understand that we can manage the complexity of their needs moving forward. Now we're really focused on working with them around deployment options, continuing to think through, you know, process improvements and other things that they need to do as they look forward to how they're going to move forward with their NextGen project.

McGregor: Now, Dayforce has experience with many large organizations, and it’s done work for government organizations like the Canada Mortgage and Housing Corporation, which offers mortgage insurance; for Elections Canada, an independent agency that runs federal votes; and CATSA, the security agency that screens passengers at airports. I wanted to know if the company had any trepidation about taking on a much larger client.

McGregor: Was there any hesitancy or concern taking on this project? When you think about — it didn't go very well for IBM. I mean, you know, people disagree about culpability and who was really responsible for the problems with Phoenix, and most of it seems to be on the government side. Did you ever think, “Maybe we don't want to get involved if this is going to turn into another nosebleed?”

Janssen: 100%. We absolutely went into the procurement process eyes wide open, and each step, making sure that it was something that we felt we could all be successful in. These are long-term partnerships and require significant investment on both sides. And so we did that not only in the procurement process, but then also in a multi-year design and experimentation phase, once we had an initial contract, to really validate across five departments that we could meet their varied and complex needs. And so for us, that actually does help with a lot of the risk mitigation of determining that this is a partnership that we want to continue to invest in and that we can all be successful in.

McGregor: Janssen refers to Dayforce as “the solution.” It was piloted in five government departments: the department of fisheries and oceans, two departments responsible for programs and policies for Indigenous people in Canada, the Department of Canadian Heritage, which supports cultural development, and another smaller department that oversees economic development in the province of Quebec. So a mixed bag of different responsibilities, and — this is important in a bilingual country — both working languages: French and English. 

Janssen: You almost think about the departments as their own different entities or organizations, and they all have very diverse needs, just like our customers do. So the department of fisheries and oceans, we have customers today in the private and public sectors that have ships at sea, and they're moving through different jurisdictions and they have to manage different time zones and overtime, different rules, things like that. So we're just validating lots of different complex cases, and how the solution meets their needs. And so if you look across the five that they selected, they're looking at things like language capabilities, accessibility, ability to manage hourly and salaried workforces and all the different iterations of their workforce. 

McGregor: It seems to me the challenge and one of the things that caused great problems for Phoenix was not so much the final furlongs of that process: issuing the cheque is fairly simple, and making the deductions for income tax and all the — so the regulatory things you have to do. It's getting to that point where you have a number of hours and a rate that you're feeding into that system. Can you talk about kind of the, you know, where the complexity in this process was, when you went in there to look at these five departments?

Janssen: What you're describing, today, they're managing across a number of different systems, right? So you have time management in one place — it may or may not have effective dating — that has to be moved to a different system when it comes to pulling their HR record. And that all needs to be batched and moved to a different system for pay. And there's a lot of complexity and trying to move data between systems, particularly when you're trying to manage where updates are made, and different teams are making them.

When it comes to Dayforce, because it's a single application, you're not moving data between systems. When someone clocks in, we're automatically calculating their net pay. And so not only does that cut down a ton of complexity and improve accuracy, it also enables us to do auditing and manage any changes that need to be made in real time. You're not waiting and having a crunch rate at the end when you're processing pay. Because it's a single application, you're able to address issues on a regular basis and really manage by exception. It's much simpler than the complexity that they deal with today. 

McGregor: Yeah, but you still have the 80,000 different rules that are largely consequence of collective agreements between the various bargaining units in each department and right across government. So does each one of those require a human from your company to come in and look at it and say, “This is how we're going to do this. And we're gonna put this code into the software.”?

Janssen: Yeah, no, I mean, the rules proliferation is a limitation of the way that those systems were structured, and the customizations that were required to accommodate all of those CBAs at the time. For us, we have a very flexible rule engine. We're able to go through the different agreements and map them and build out the rules within Dayforce through configuration. So these are not customization, they're not needed to be maintained by the government. They're just configurations within our application that are maintained for them, and that we can move across departments. 

McGregor: This is a key point. A major factor in Phoenix’s failure, as we’ve heard repeatedly, was the complexity of all the pay rules that were thrown at it, and the amount of customization that was required on the software end to accommodate them all. 

Janssen: Avoiding customization and working in a single application for HR and pay solves a lot of the challenges that we see within Phoenix. 

McGregor: You say avoiding customization. But isn't that what the job is? I mean, each department needs a specific solution, has specific requirements — isn't that customization? I mean, tell me a little bit more about it.

Janssen: It's a great question. Customization is when you take software and you manipulate it specifically for one customer, and then that customer is responsible for maintaining those customizations. And that can be very, very complex and difficult. In the case of Dayforce, it is a single application where you're doing configuration. You're going in and you're using dropdowns and choices in the solution to build out the rules that ultimately drive the configuration or the management of the CBAs. So we, Dayforce, maintain our solution, and it's not up to the Government of Canada to maintain their individual customizations. We’re not customizing the solution, it’s all standard SaaS technology.

McGregor: One of the problems that became sort of emblematic of Phoenix was the acting title for public servants, right? And we heard this a lot from people: “Well, my boss went away and I became the acting director general of our unit.” And, you know, they could never figure this out. And it got to the point where people were refusing the assignments because they didn't want to have something happen to their pay that was going to require a change that might end up them not getting paid at all. I know people want to know: “Can I take the acting position now?”

Janssen: Yes. Oh my gosh, like, imagine, right? Like, these are our civil servants. They serve Canadians. You want them to be able to feel like they can go and do their job and not worry about whether or not they're getting paid or not, right? So, yes. I know that was at the forefront of a lot of the testing that we did. It was at the forefront of the procurement.

McGregor: And how long will it take? Because the unions are getting impatient, they had a press conference very recently where they talked about 400,000 cases still in the Phoenix backlog. They want to know when a new system will be in place. Do you have any kind of insight into a timeline, how long that might take?

Janssen: I think every implementation is a little bit different. And the technology configuration itself is actually fairly quick. It's really taking your time to make sure that we're capturing all of the requirements, that we're going through the appropriate change motions and that we're doing that at the velocity that the client feels comfortable with, is the most critical. Understandably, you know, they're coming from a really tough situation as they move forward, and we'll want to do that thoughtfully. 

McGregor: So here we are, eight years after Phoenix launched and much longer since the Government of Canada first set out to replace its legacy payroll system. The process began with managers in the public service and unions that represent their employees largely in agreement. The old regional pay system needed an overhaul.

But they didn’t agree on how to do it. The government decided to reduce the number of payroll workers — the compensation advisors — and centralize many of those who remained in a small remote community. The specialized knowledge that so many advisors had developed in their departments was lost. And then the government tried to automate the process, to reduce a huge set of pay rules into lines of computer code.

Despite warnings it wasn’t ready to go, that it hadn’t been properly tested, government managers decided to launch anyway, hoping the system they called Phoenix would work right out of the gate. And when it didn't, there was no real backup because the old system had been decommissioned.

Graham Jenkins, the global payroll expert in the U.K. who I talked to in our first episode, says a major issue is that the transformation project didn’t take into account all the processes that have to happen en route to the paycheque. So compensation advisors were expected to sort through inconsistent data by themselves.

Jenkins: What I think you have is a neglect, or a lack of appetite, to transform, simplify, standardize, making the life of payroll impossible or extremely difficult. When I read about the project — with no good feeling, it's not a feeding frenzy for me. It's, you know, you read it with sadness, and we're trying to all learn lessons from it. But I’ll put it bluntly, I don't think the appetite was there to flatten the unique, standardize and assign ownership for the upstream processes.

McGregor: It all boils down to a sort of existential question about what payroll is.

Jenkins: Where does payroll see itself? And, you know, what's the view of payroll? And payroll is the poor relation.

McGregor: Payroll as the poor relation, the neglected department nestled under HR or finance. Expected to pay everyone on time with 100% accuracy, but with little understanding from the outside about how much work that actually takes. 

Jenkins: It's not a payroll project. It's not. It's an end-to-end employee service project. Because at the end of the day, it's that end-to-end piece that's going to make payroll on time, compliant, efficient and centralizable. If it's not viewed as an end-to-end employee service, it is not centralizable without the result that sadly is being seen with the Canadian project.

McGregor: You can debate who’s to blame. Maybe the three executives on the Phoenix pay project? They made the decision to push forward despite warnings from IBM, an outside consulting firm and compensation advisors. The auditor general didn’t name the executives in his reports on Phoenix, but the media pointed to three individuals. One was shuffled into a special advisory role in the same department. Another was appointed as the senior advisor to the Privy Council Office, a top government department that supports the prime minister and cabinet ministers. All three individuals have since retired from the public service.

I reached out to one of them online last fall to ask if she’d come on the podcast. She declined my invitation but said in a message that, and I quote, “Phoenix was implemented … seven and a half years ago and continues to deliver biweekly pay to over 300,000 federal public servants.”

At the end of the day, the responsibility rests with the government, and the Canadian government is actively trying to build a new pay system. In its most recent federal budget, it set aside another $17 million over the next five years to improve human resources and pay systems, including work on next generation pay. The Dayforce SaaS product might ultimately be the answer. The early results are promising. 

What we still don’t know is how long it will take to implement across the federal government, to ensure all workers are paid properly and promptly. And hopefully, when the next generation system is fully launched, it will go great and we won’t need to do a second season of this podcast. But as we’ve seen in other places — Australia, San Francisco, the UK, even Papua New Guinea, just recently — getting payroll right is a continual challenge for governments and organizations, with major repercussions. And every organization, whether a private company or a giant public employer, could come face to face with the same problems if they don’t take payroll seriously.

This was the final episode of this podcast. Thanks for listening. 

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• Professional Institute of the Public Service of Canada: Press Release — Largest federal public sector unions call for ongoing Phoenix damages on 8th anniversary
• Government of Canada: Government of Canada makes progress in exploring new human resources and pay system 
• Government of Canada: Next Generation Human Resources and Pay Final Findings Report - Canada.ca 
• Dayforce: Dayforce - HCM Software 
• Government of Canada: 2024 Reports of the Auditor General: Report 1—ArriveCAN
• CBC: ArriveCan flop casts shadow over future projects, experts say 
• The Ottawa Citizen: Did bonuses fuel the Phoenix fire?
• CPAC (video): Unions want more compensation for public servants still affected by Phoenix pay system issues 
• CPAC (video): Auditor General Karen Hogan highlights management and contracting issues with ArriveCAN app
• CBC (video): Poilievre criticizes use of outside consultants after ArriveCan report