Federal Employees Compensated $685 Million for Phoenix Pay System Error: Briefing Note

Members of the Public Service Alliance of Canada affected by Phoenix Pay System errors protest on the three-year anniversary of the launch of the pay system, in Ottawa on Feb. 28, 2019. The Canadian Press/Justin Tang

Federal employees have been compensated around $685 million by the government for a payment error that occurred several years ago resulting from a glitch in the Phoenix payroll software system, according to an internal briefing note.

“To date approximately $685 million has been paid in damages relating to the Phoenix Pay System,” said a briefing note prepared for Treasury Board President Mona Fortier on Nov. 21, 2022, and obtained by Blacklock’s Reporter.

The figure cited in the note included $125 million in compensation paid by Ottawa last year.

The Liberal government launched the Phoenix Pay System in 2016 in an effort to consolidate and replace a number of outdated payroll systems that were still being used for federal employees at the time.

The transition to Phoenix was also meant to save Ottawa millions of dollars annually, but its rollout resulted in thousands of federal employees either being overpaid, underpaid, or receiving no payment at all.

To compensate the employees affected, the Public Service Alliance of Canada announced in 2020 that federal employees affected by the payroll system glitches could receive $2,500 each.

“We recognize implementation of the Phoenix Pay System has had an impact on many current and former employees,” said the November 2022 briefing note prepared for Fortier, without disclosing the total value of unpaid compensation claims.

‘Continued Weaknesses’

Despite high compensation costs, the federal government is yet to release figures showing total costs accrued from the 2016 Phoenix Pay System failure.

As of October 2022, around 120,000 federal employees were still required to make payments to the government as a result of being overpaid through Phoenix, with the total amount owed standing at close to $560 million.

“The government has an obligation to recover outstanding overpayments,” said a briefing note from the time, titled “Phoenix Salary Overpayments.”

The note is dated from around the same time that the office of Auditor General Karen Hogan penned a report saying that around a quarter of federal employees were still experiencing payment problems because of the Phoenix system.

“Our audit noted continued weaknesses in internal controls of pay processes,” Hogan’s office wrote in its “Commentary on the 2021–2022 Financial Audits,” published in October 2022.

The commentary said that “pay errors continued for many employees” in the past year, with around 28 percent of federal employees sampled telling Hogan’s office that they had experienced an error in their basic or acting pay during the 2021–2022 fiscal year—which was down from 47 percent of employees in the previous year.

Hogan’s office also found that, as of March 31, 2022, about 17 percent of federal employees still required Ottawa to make corrections to their payment, which represented a decrease from 41 percent in the previous year.

“These findings represent an improvement over previous years,” said the commentary. “However, the percentage of errors is still concerning.”