Government’s payroll fiasco highlights importance of prep, resources, communication
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As of Dec. 27, more than half of Canada’s public servants were experiencing some form of pay issue, with about 616,000 transactions awaiting processing — all because of the disastrous implementation of a new payroll system called Phoenix.
And in the new year, federal government workers were given more bad news when Public Services and Procurement Canada gave them a deadline of Jan. 19 to declare overpayments from the troubled pay system.
Under the plan, employees who met the deadline would only have to pay the net amount they received, according to the Canadian Press. But those that failed would have to repay the gross overpayment, including tax and other deducted amounts they never actually received.
As of June 30, 2017, the amount of overpayments totalled $295 million, according to a November report from the auditor general.
The implementation of the Phoenix payroll system has been problematic from the very start. And now, two years later, the problems are far from over.
But on a more positive note, there are takeaways for employers here.
Because payroll is a core component of an employee’s life, it must be treated with high importance, according to Janice MacLellan, vice-president of operations at the Canadian Payroll Association in Toronto.
“Given the critical impact that payroll has on people’s lives — it’s not the same as other technology projects, it’s not the same as other business projects — there’s real significant impact,” she said. “When it comes to implementing a payroll system, it really is the ultimate test of good project management.”
First steps
For one, proper planning is essential before an implementation, according to Paul Elliott, president and COO of Ceridian in Toronto.
“When you have a complex project, be it a payroll project or an ERP (enterprise resource planning) system or whatever, it starts with basic project principles,” he said. “You have to have proper ownership and proper governance in place, and you have to establish clear objectives and measurements of what success is.”
A look at the business objectives should also become part of the process.
“Probably the key of those elements is making sure you’ve got the business objectives down properly to understand what are you trying to achieve with this system,” said Elliott.
The new system should facilitate “not just the status quo — you are looking to improve your business with better technology and better processes,” he said.
And before the project plan is put into place, employers should take a look at what they are currently working with, said Gurteg Grewal, vice-president of product innovation at ADP Canada in Toronto.
“(Make an) audit of your existing system to understand the redundancies, pain points, legacy issues,” he said. “Understand your technology requirements, mobile, data analytics, and reporting.”
Parallel runs, data conversion
A duplicate run is important “to confirm that everything is working properly,” according to Lyle Scammell, president of Canpay Software in Winnipeg. “We always run a parallel run, but usually never two parallel runs because it is too hard on the payroll person.”
“The parallel just confirms that we are on the right track and everything is working at it should be; any differences are because they weren’t being done right on the other system.”
For bigger jobs, the parallel run may last longer, according to MacLellan. “You still have to run the existing payroll, so you are often managing parallel payroll processes and systems for a number of months.”
Typically, a small payroll implementation (about 25 employees) can takes two days to complete, while a large, multinational, complex process can take nine months, and depending on the risk profile of the clients, it may take 12 months, said Elliott.
Employers shouldn’t hesitate to do things in small phases, said MacLellan, “so that, at the end of every phase, you can do another environmental check to see where you are and what needs to change for the next phase.”
Making sure the data gets replicated correctly from the old system to the new one is probably the most critical element, said Elliott.
“It’s all about getting data integrity; it’s really about converting your data onto the new system, so you really want to pay attention to all the details around managing your data accuracy.”
Companies should not rush data conversion, according to Grewal.
“Take the time to analyze and cleanse the data before converting it over into your new system. This exacerbates an existing problem and makes more work in the long-run.”
Adequate resources
Employers should also ensure they have enough resources to handle the project, said Elliott.
“When you have a team, you know they have day jobs, so you have to really take into account who is going to do the work from an internal perspective, and actually establish what you are going to do with your third-party vendor.”
“You’ve got to get the proper stakeholders and get them aligned from a time perspective,” he said. “You better get way ahead of the curve and get them engaged and involved in the project early on — you don’t want to surprise anybody.”
Building the right set of workers is another important consideration, said Grewal.
“By having all the stakeholders (HR, finance, IT, the vendor) at the table together, each group will identify different needs, challenges, considerations and solutions to ensure a smoother execution,” he said. “This is especially helpful from a compliance perspective to ensure you know the correct rules and regulations and tax implications at both the federal and provincial level.”
Change management
As with many big projects, timely messaging helps move things smoothly along.
“Communicate, communicate, communicate with all stakeholders throughout, but you also need to listen,” said MacLellan. “You need to make this a two-way street; if the stakeholders are saying to you they are struggling, or they don’t understand or they have some concerns, stop and listen because you may have an opportunity to be flexible and make some tactical adjustments to the project plan, and then retest to make sure the organization is ready.”
If you are changing people’s pay, whether it’s how they get paid, a stub, anytime you collect time, there’s a critical element of change management, said Elliott.
Many companies invest the time and resources to implement a great new payroll system, said Grewal, “with all the bells and whistles in the back-end to deliver a great employee experience, but they fail to invest in a change management plan to communicate it. Put equal investment on the change side as you do the payroll side to make sure employees understand the value and are excited.”
HR’s role
With HR becoming more integrated with most modern payroll systems through HCM (human capital management) systems, it’s easier to become involved, said MacLellan.
“HR is the advocate; HR should be there in terms of always communicating the progress of the implementation project, reminding the staff about some of the benefits to the business and help with the celebration,” she said.
A company’s reputation is on the line, said MacLellan, so getting it right matters with employee retention.
“People’s paycheques are very personal to them. You don’t want to see employees leaving the organization because they can’t trust what comes into their payroll.”
Satisfied employees are key, said Elliott.
“As an employer, you have a fiduciary obligation to pay your people properly. It’s a legal obligation but it’s a moral obligation as well.”
And when payroll doesn’t work, that’s when employees get worried, said Scammell.
“It causes grief all over the place… staff will be talking about ‘Maybe we are going into receivership’ and that type of thing,” he said. “Payroll has to be very accurate and on time; everything else in the accounting world can be slow. If your GL (general ledger) is a day late, who cares, but if you payroll is a day late, you will hear from the president for sure.”
And in the new year, federal government workers were given more bad news when Public Services and Procurement Canada gave them a deadline of Jan. 19 to declare overpayments from the troubled pay system.
Under the plan, employees who met the deadline would only have to pay the net amount they received, according to the Canadian Press. But those that failed would have to repay the gross overpayment, including tax and other deducted amounts they never actually received.
As of June 30, 2017, the amount of overpayments totalled $295 million, according to a November report from the auditor general.
The implementation of the Phoenix payroll system has been problematic from the very start. And now, two years later, the problems are far from over.
But on a more positive note, there are takeaways for employers here.
Because payroll is a core component of an employee’s life, it must be treated with high importance, according to Janice MacLellan, vice-president of operations at the Canadian Payroll Association in Toronto.
“Given the critical impact that payroll has on people’s lives — it’s not the same as other technology projects, it’s not the same as other business projects — there’s real significant impact,” she said. “When it comes to implementing a payroll system, it really is the ultimate test of good project management.”
First steps
For one, proper planning is essential before an implementation, according to Paul Elliott, president and COO of Ceridian in Toronto.
“When you have a complex project, be it a payroll project or an ERP (enterprise resource planning) system or whatever, it starts with basic project principles,” he said. “You have to have proper ownership and proper governance in place, and you have to establish clear objectives and measurements of what success is.”
A look at the business objectives should also become part of the process.
“Probably the key of those elements is making sure you’ve got the business objectives down properly to understand what are you trying to achieve with this system,” said Elliott.
The new system should facilitate “not just the status quo — you are looking to improve your business with better technology and better processes,” he said.
And before the project plan is put into place, employers should take a look at what they are currently working with, said Gurteg Grewal, vice-president of product innovation at ADP Canada in Toronto.
“(Make an) audit of your existing system to understand the redundancies, pain points, legacy issues,” he said. “Understand your technology requirements, mobile, data analytics, and reporting.”
Parallel runs, data conversion
A duplicate run is important “to confirm that everything is working properly,” according to Lyle Scammell, president of Canpay Software in Winnipeg. “We always run a parallel run, but usually never two parallel runs because it is too hard on the payroll person.”
“The parallel just confirms that we are on the right track and everything is working at it should be; any differences are because they weren’t being done right on the other system.”
For bigger jobs, the parallel run may last longer, according to MacLellan. “You still have to run the existing payroll, so you are often managing parallel payroll processes and systems for a number of months.”
Typically, a small payroll implementation (about 25 employees) can takes two days to complete, while a large, multinational, complex process can take nine months, and depending on the risk profile of the clients, it may take 12 months, said Elliott.
Employers shouldn’t hesitate to do things in small phases, said MacLellan, “so that, at the end of every phase, you can do another environmental check to see where you are and what needs to change for the next phase.”
Making sure the data gets replicated correctly from the old system to the new one is probably the most critical element, said Elliott.
“It’s all about getting data integrity; it’s really about converting your data onto the new system, so you really want to pay attention to all the details around managing your data accuracy.”
Companies should not rush data conversion, according to Grewal.
“Take the time to analyze and cleanse the data before converting it over into your new system. This exacerbates an existing problem and makes more work in the long-run.”
Adequate resources
Employers should also ensure they have enough resources to handle the project, said Elliott.
“When you have a team, you know they have day jobs, so you have to really take into account who is going to do the work from an internal perspective, and actually establish what you are going to do with your third-party vendor.”
“You’ve got to get the proper stakeholders and get them aligned from a time perspective,” he said. “You better get way ahead of the curve and get them engaged and involved in the project early on — you don’t want to surprise anybody.”
Building the right set of workers is another important consideration, said Grewal.
“By having all the stakeholders (HR, finance, IT, the vendor) at the table together, each group will identify different needs, challenges, considerations and solutions to ensure a smoother execution,” he said. “This is especially helpful from a compliance perspective to ensure you know the correct rules and regulations and tax implications at both the federal and provincial level.”
Change management
As with many big projects, timely messaging helps move things smoothly along.
“Communicate, communicate, communicate with all stakeholders throughout, but you also need to listen,” said MacLellan. “You need to make this a two-way street; if the stakeholders are saying to you they are struggling, or they don’t understand or they have some concerns, stop and listen because you may have an opportunity to be flexible and make some tactical adjustments to the project plan, and then retest to make sure the organization is ready.”
If you are changing people’s pay, whether it’s how they get paid, a stub, anytime you collect time, there’s a critical element of change management, said Elliott.
Many companies invest the time and resources to implement a great new payroll system, said Grewal, “with all the bells and whistles in the back-end to deliver a great employee experience, but they fail to invest in a change management plan to communicate it. Put equal investment on the change side as you do the payroll side to make sure employees understand the value and are excited.”
HR’s role
With HR becoming more integrated with most modern payroll systems through HCM (human capital management) systems, it’s easier to become involved, said MacLellan.
“HR is the advocate; HR should be there in terms of always communicating the progress of the implementation project, reminding the staff about some of the benefits to the business and help with the celebration,” she said.
A company’s reputation is on the line, said MacLellan, so getting it right matters with employee retention.
“People’s paycheques are very personal to them. You don’t want to see employees leaving the organization because they can’t trust what comes into their payroll.”
Satisfied employees are key, said Elliott.
“As an employer, you have a fiduciary obligation to pay your people properly. It’s a legal obligation but it’s a moral obligation as well.”
And when payroll doesn’t work, that’s when employees get worried, said Scammell.
“It causes grief all over the place… staff will be talking about ‘Maybe we are going into receivership’ and that type of thing,” he said. “Payroll has to be very accurate and on time; everything else in the accounting world can be slow. If your GL (general ledger) is a day late, who cares, but if you payroll is a day late, you will hear from the president for sure.”
