Federal Employees Owe Treasury Nearly $560 Million After Overpayment Error: Report

The Canadian Parliament in Ottawa in a file photo. Saffron Blaze via Mackenzie.co

A number of federal employees who were mistakenly overpaid due to a glitch in a failed payroll software system owe the treasury a total of $559 million, say updated figures from the Department of Public Works, according to a report.

“As of October approximately 120,000 employees have an outstanding overpayment balance. The outstanding salary overpayments stand at approximately $559 million,” says a briefing note from the department, titled “Phoenix Salary Overpayments,” which was obtained by Blacklock’s Reporter.

“The government has an obligation to recover outstanding overpayments,” it said, adding that both current and former employees are now in debt to the treasury.

The briefing note gave no repayment deadlines nor estimated how much of the overpaid salaries the federal government would be able to recover because of employee deaths and resignations since the mistake, among other factors.

The government launched the Phoenix Pay System in 2016 in an effort to consolidate a number of outdated payroll systems that were still being used at the time. The move was also meant to save the federal government millions of dollars annually.

However, the Phoenix system’s rollout resulted in thousands of federal employees either being overpaid, underpaid, or receiving no payment at all.

The Public Works Department briefing note said that the number of employees overpaid by the system was capped at 372,000, who owed a total of $3.02 billion as a result.

It added that “thousands of current and former federal employees have reimbursed overpayments or made arrangements to do so.”

Overpayments

Auditor General Karen Hogan said in an October 2022 report that over a quarter of federal employees continue to experience problems because of the Phoenix system.

Hogan said that 28 percent of civil servants sampled by her office reported ongoing errors with their payment.

The auditor general also said that about $500 million in overpayments were made by the system to over 100,000 federal employees.

“Despite the pay centre’s significant efforts since 2016, the level of outstanding requests has started to rise,” Hogan wrote in her “Commentary on the 2021–2022 Financial Audits.”

“This indicates that more efforts are needed, particularly to process requests that have remained outstanding for several years.”

The Public Service Alliance of Canada (PSAC), which is Canada’s biggest civil-service union, said in 2020 that federal employees affected by the Phoenix system’s errors could receive $2,500 each for the “pain and suffering” caused by former payment mistakes.

“After four years of stress, uncertainty, and financial hardships because their employer couldn’t pay them correctly or on time, our members will finally be compensated for the Phoenix pay disaster,” PSAC national president Chris Aylward said in a statement at the time.

The Canadian Press contributed to this report.