The other side of Phoenix: Public servants who were overpaid are also hurting

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Remarkably, we’re approaching the second anniversary of the rollout of the federal government’s Phoenix Pay system — with no fix in sight.

By now, Canadians outside the capital region are undoubtedly tired of stories about government workers shortchanged on payday. Everyone wants the problem to go away.

Yet there’s another group of government employees wrestling with an entirely different set of Phoenix-related difficulties — and from whom we’ve heard relatively little. These are the allegedly favoured ones who have received too much pay since Phoenix’s February 2016 rollout.

Surprisingly, the problem of overpayments runs deeper in the Phoenix system than the one involving underpayments. Auditor-general Michael Ferguson discovered that, as of last June, 59,000 employees owed a collective $295 million in back pay to the government, compared with 51,000 workers who were owed $228 million. There’s some double counting here because many employees — it’s not clear how many — have encountered under and overpayments simultaneously.

Because going without pay is much more serious than being paid too much, Public Services and Procurement Canada, the department in charge of Phoenix, has given higher priority to those who have been shortchanged.

But, believe it or not, those who have received too much pay are also experiencing financial pain, especially at the end of the calendar year when tax issues come into play.

Consider the case of Céline Sicard, a 34-year old government employee who switched jobs between federal departments in mid-2016. For several months into her new job, she received pay from her former position as well. Two paycheques. When Sicard notified Phoenix pay administrators in Miramichi, N.B., she didn’t hear back.

Finally, with the help of a pay administrator from her own department, she arranged to return the extra compensation. But she did so too late for the 2016 tax year.

The consequence was that her T4 tax document for 2016 showed the government had paid Sicard considerably more salary than she had actually earned.

Sicard declined to provide her pay details but we can get an idea of the impact on her finances through the example offered by Canada Revenue Agency on its website. It shows that an employee earning $80,000 per year would normally see $20,000 deducted for taxes and other payroll items. But if the employee received $10,000 in overpayment, another $2,500 would be deducted, leaving additional net pay of $7,500.

Now, here’s the problem that is giving some employees so much angst. To make good their situation, they must first return the full $10,000 to the government and then re-file their taxes with the correct pay information to reclaim the $2,500 that had been deducted. Not only is this extra paperwork aggravating, the affected employees usually must wait weeks for the refund that will make them whole again financially.

In theory, government workers can avoid this problem by repaying excess salary before their employer issues their T4s (or amended T4s) in the new year. But this depends on smooth communications between the Phoenix pay centre in New Brunswick and individual federal departments and agencies.

With any luck, the upcoming tax season — filing deadline is next May 1 — will draw on lessons from last year. Public Services and Procurement Canada spokesman Pierre-Alain Bujold noted in an email: “Employees who are in an overpayment situation will be notified and will be given options to repay the government through a lump sum or instalments, by cheque or payroll deduction.”

Further, the Public Services department has informed the Public Service Alliance of Canada — the government’s largest union — that as long as employees report their overpayments by Jan. 15, (by calling 1-855-686-4729) they will have to repay only the net amount they received, $7,500 in the above example. This means no waiting for refunds.

Bujold added that Public Services intends to follow up next summer with employees who have received too much pay, but only after Canada Revenue Agency has processed the 2017 tax returns. “Employees should never have to pay back more than they received,” Bujold concluded.

CRA, for its part, says it has trained its agents in the complexities of Phoenix issues, most notably the tax ramifications of overpayments.

But such are the demands on the Phoenix system that not everything goes as planned.

Sicard discovered this to her great surprise last May and June, when the Phoenix system suddenly began deducting from her paycheques to cover the overpayments she had already returned. Only now, she reports, are Phoenix administrators working on her file in depth.

Sicard’s experience doesn’t appear unusual. An examination by this newspaper of the “issues” dashboard maintained by Shared Services Canada (SSC), and obtained through access-to-information, shows the problem of overpayments crops up in many ways.

One entry from last summer shows an employee being notified she had been overpaid $2,600. Next, the pay system started to recover the overpayment by stripping away her entire next pay cheque of $2,025. Then Phoenix repeated this step, resulting in the government now owing the employee $1,450.

Another entry includes the case of an employee who had received two pay cheques for the same pay period. An administrator explains in a side note: “One cheque appears to be to make up for one of the two that Phoenix missed, even though I received a sub-cheque from SSC-human resources and a reduced pay, last payday.”

Multiple other entries note that employees received repeat payments for the same period of overtime. And, of course, there were entries dealing with the surprisingly common issue of payments going to former employees.

Sicard has kept a working spreadsheet of her salary and benefits payments since April 2016, when the flaws of the Phoenix system became widespread. In addition to overpayments, she has also been short changed by raises that failed to register. Her finding: a strong majority of her paycheques contained errors.

Sadly, that sounds about right.

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