With the epic Phoenix Pay disaster now approaching the third anniversary of its launch, it’s sometimes easy to forget just how abnormal it is to constantly deal with messed up pay.
“To be paid properly is part of a fundamental contract, whether it’s from your bank or employer” says David Ossip, the CEO of pay systems specialist Ceridian.
“When I get cash from an ATM,” the Toronto-based entrepreneur explains, “I don’t even count the bills, and no one looks at their earnings statements.”
Lots of us don’t carry our trust quite that far, but Ossip’s point is that even when we do check our bank or earnings statements, these are nearly always correct. His own company processes pay on on its core platform on behalf of more than one million Canadian workers with an accuracy rate of 99.9 per cent.
In sharp contrast, more than 200,000 federal government employees are still staring at more than 400,000 pay transactions in a queue awaiting correction or disposition.
Why should we care about Ossip’s opinion? Well, it could matter a lot in the months to come. His company, Ceridian, is one of just five competing for the right to provide the underlying technology for the government’s next generation human resources and pay system. And things are moving along faster than expected.
The five — which also include CGI Group, Oracle, SAP and Workday — qualified last fall for a short list maintained by the Next Generation Human Resources and Pay project office run by Alex Benay, the government’s Chief Information Officer.
In the weeks since, the competitors have been configuring their systems at various federal departments. Ceridian’s trial run, for instance, is taking place at Fisheries and Oceans.
Government HR and pay experts are evaluating the ability of the contenders’ technologies to deal with the federal government’s vast array of pay rules, scheduling issues and bargaining units.
In a two-step evaluation beginning Jan. 18 and ending Feb. 4, the short list will be trimmed to just three. The idea is to give government a much better idea of the options that are out there.
Once the short list of three has been determined, Benay will recommend the best technical approach to his political bosses, then ask the government’s contracting agency, Public Services and Procurement Canada, to conduct a detailed competition through a request for proposals. Since the Liberal government is anxious to show progress on the Phoenix Pay file in advance of the October federal election, there is every incentive for the RFP phase to get underway soon, with a contractor selected by June.
It would then take at least another couple of years to fully test and implement the new system but, since this will be rolled out in stages, some federal departments could be using the next generation system before yearend 2019.
In the meantime, Benay’s office is also soliciting private sector advice on a wide range of fronts to try to fix the broken Phoenix Pay system, which was built on human resources technology supplied by PeopleSoft and and adapted by subcontractor IBM.
Benay has little choice but to run the two procurements — stabilizing Phoenix and next-generation HR and Pay — in parallel. But it sets up an interesting dynamic. If the government actually fixes the Phoenix Pay system in the coming years, it might then have the option of delaying the installation of a brand new mechanism for many more years. An important caveat: this would make sense only if the repairs allowed the government to run Phoenix without the hundreds of extra temporary workers it has hired in the past year or so.
But how likely is a Phoenix fix and how would it compare to a blended HR and pay system?
Ossip’s view is that the previous Conservative government made a fundamental error when it opted to use the PeopleSoft human resources software as a base, then hire IBM to write a ton of code to stitch it together with the government’s pay system. This arrangement, now embedded in stone, requires many manual workarounds to reconcile the different kinds of data.
Here’s why. Historically, companies kept separate the management of payroll and time cards — which means any changes that occur during a two-week pay period are reconciled at the end. Typically, these include shift premiums, promotions, overtime, acting positions and other items that affect pay. Because the reconciliation takes place during a short period, mistakes occur that must be corrected manually. In the Phoenix Pay system, the ability to fix errors was severely compromised by the government’s decision to trim hundreds of pay experts in the run up to the launch of the new system Feb. 24, 2016.
Ossip, who took over as CEO of Ceridian in 2012, drew on decades of experience in workforce and payroll companies to develop a system that merges payroll and time functions. The mechanism is complicated but the essence is simple — Ceridian’s core technology continuously calculates net pay as the data enters the system instead of waiting until the end of the pay period. This means the need for reconciliation is much reduced, and so is the likelihood of errors.
In short, the workflow is more spread out.
Ceridian’s performance speaks for itself. In the past year, the company has seen the number of people using its core HR and pay software jump to more than 3 million from 2.5 million. About 30 per cent of the customers are Canadian — think Molson’s, CMHC, Roots Canada and Morneau Shepell. Although the firm has deep U.S. roots, it has undergone vast shifts in focus and structure. Most of Ceridian’s executives, including Ossip, now operate out of Toronto.
It’s by no means clear how Ceridian stacks up against its four much larger rivals, but — thanks in part to last year’s initial public offering on the TSX — Ceridian’s payroll-related business is available for all to see.
The financial documents show that Ceridian has added nearly as many Canadians to its pay system technology in the past year as there are federal government employees who depend on Phoenix Pay in total — with only isolated technical issues.
This isn’t to say Ceridian’s technology is risk-free. To keep its payroll and time calculation engine up to date, the firm has to keep pace with developments in internet hardware, operating systems, database software and browser technology. Not only that, Ceridian’s technology depends on multiple data processing systems — payroll, accounting, financial and others — to perform significant numbers of complex transactions on a continuous basis.
It’s a business model that demands constant attention.
Is it suitable for use in government operations? Alex Benay’s evaluators likely have developed some early views on this after months of testing.
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