Philly’s new payroll system to give workers a pay bump: ‘That sounds crazy but …’

In January, thousands of city employees could find themselves working fewer hours for the same salary and others will be working the same hours for more money, thanks to a new human resources computer system that will have cost more than $44 million by the time it is operational later this year.

For uniformity, city officials want the new system to classify about half the workforce, or 13,400 employees, as working 7.5-hour days.

But since many have jobs that require them to work eight hours a day, that design choice could end up costing Philadelphia millions, and wipe out some of the savings officials projected from getting a new computer system in the first place.

The move could have at least three potential ripple effects: Some employees who currently work eight-hour days will be moved to a 7.5-hour schedule but paid the same salary. Others workers whose jobs require them to work eight hours must maintain that schedule and will be paid more for what, on paper, will be considered an extra 30 minutes a day. And the shorter workday means 11,000 who are eligible for overtime will see a 10 percent increase in their overtime pay rate.

Labor union officials were baffled when the city approached them about switching to 7.5 hours. The city's blue-collar union, AFSCME District Council 33, initially fought the change, asking why the new system couldn't accommodate both kinds of workers, but eventually accepted it when city officials told them employees would get more money in the deal.

"They said it has to do with computer stuff, it all has to be uniform," said Sam Spear, DC33's labor attorney. "We said, 'That sounds crazy but if you say so.' "

The city says it does not know how much the switch will cost because officials cannot currently say how many employees currently work 7.5 hours or eight hours.

"We expect that many employees will continue to work 7.5 hours because they are already doing that and that some departments will change their 8 hours workers to 7.5 hours, thereby avoiding any additional cost," city spokesperson Mike Dunn said in an email. "Of course, there are some departments who will actually work 8 hours and pay the extra half hour on a regular basis. We can't, at this point, pinpoint that last group and predict how all of this will work out or the cost of it."

But one impact is clear: The move will increase the hourly rate for many workers, and thus will hike overtime rates.

If overtime were to remain the same as it was this past record-breaking year, the city would be on the hook for more than $7 million in additional payroll cost. That's not counting the additional 30 minutes of straight-time pay some will get for keeping to their eight-hour workday.

For an employee with a $50,000 salary, that could mean an automatic $3,072 annual pay bump. Multiply that by thousands and the hourly rate switch could put a dent in its $4.7 billion annual budget. The additional compensation would also be used to calculate employees' future pensions and thereby increasing the city's liability long term.

The system upgrade is part of the One Philly project, launched in 2014 to link the city's personnel, payroll, pensions and benefits systems and give managers the ability to better keep track of employee hours and reduce the use of overtime. For decades every piece of employee information has been manually entered into various incompatible programs.

The new system can accommodate both 7.5- and eight-hour workdays. It will cover police officers, firefighters, prison guards, sheriff deputies, and all court employees who will continue to work their eight-hour and 12-hour shifts. But legions of other employees won't be accommodated.

"If you are building all this specialty code, why not account for 7.5 hour workers and eight-hour workers," said one source with knowledge of the system, who requested anonymity because he's not authorized to speak about the project. "Why would you give up millions of dollars for nothing?"

Pennsylvania has a similar split among its 73,000 public workers — 46,000 work 37.5-hour workweeks while many of the rest, in law enforcement and certain facilities, work 40-hour weeks. But the state doesn't pay extra for its eight-hour-a-day workers.

One option for Philadelphia would have been to make everyone eight-hour employees. Because the current payroll system was already calculating workdays that way, such a move would have been cost-neutral, Dunn said.

Officials, however, did not want to inconvenience employees who might have been forced to extend child care or adjust other commitments.

"We did an analysis of it and at the time we presented it to the steering committee and at the time they thought the benefits outweighed the negative," Rick Stewart, the One Philly project director, said of going to 7.5-hour days.

He cited the incompatibility of the previous disjointed system.

"As you can imagine, addresses spelled differently or different benefit type information put into another system doesn't match another," Stewart said. "So we are constantly going back and forth saying well why doesn't this match here, what's the system of record?"

Ciber Inc was selected as the lead vendor for One Philly with a $14.8 million contract and a 2½-year timeline. But as the Inquirer and Daily News reported last year, the project was riddled with significant delays and cost overruns by the time the firm, based in Colorado, filed for bankruptcy in April 2017. By then Ciber had been paid $9 million and the city had spent millions more on software and staff. Yet One Philly was far from complete.

Other governments, including the Hawaii Department of Transportation and Washington state's community colleges, went to court over Ciber Inc.'s inability to deliver and won.

Philadelphia decided it was best to proceed and finish the project. The city increased its contract with the company, by then purchased by HTC Global and rebranded as Ciber Global, to $28.7 million, nearly double the original amount.

Philadelphia officials dismissed questions about the quality of Ciber's work, saying that the reorganized company is improved. While some of the same employees as before remain, city officials say they are confident. The new system is expected to go live by mid-December.

Vickas Bhutada, executive vice president at HTC/Ciber Global, said that when his team acquired Ciber, it checked with Philadelphia and other customers to resolve outstanding issues.

"We deployed the right team on the project, defined all the requirements and details, validated all the work that had been done, figured out the gaps," Bhutada said. "We believe we are now in very good shape and on schedule, hitting budget and we should be ready to launch as far as the plan."

It's been more than a month since the Inquirer and Daily News requested copies of Philadelphia's Ciber contracts, as well as related One Philly contractors, including Oracle. The city provided the Ciber Global contract on Monday but has not yet provided the rest. Without the original contracts, it is difficult to see just how much over budget the project currently is.

Including other vendors and payroll, the city says it expects to have spent at least $44 million by the time One Philly goes live. But even after the project is completed, taxpayers will still be on the hook for at least $3.3 million a year to support the new system.

That doesn't include the extra costs of the new work schedule.