Ottawa spent $560-million on damages over the Phoenix pay system, records show

Open this photo in gallery:

Ottawa paid out $400-million to federal public servants last year as part of continuing compensation for damages related to the Phoenix pay system, which caused major payroll disruptions across the government.

That newly revealed amount is in addition to the $160-million in compensation Ottawa paid the previous year. The government estimates an additional $165-million could be paid during this current fiscal year, which would bring the total to more than $700-million.

The government-wide Phoenix payroll system launched in 2016. Initially, Ottawa said the new platform would save it millions of dollars a year by replacing a mix of outdated systems.

And yet Phoenix, which continues to be used while Ottawa makes improvements and explores options for a replacement, has been a disaster from the start. It has caused stress for thousands of public servants who have received inaccurate paycheques, in some cases leaving them with administrative headaches at tax time. A 2018 Senate review highlighted individual cases of extreme anxiety as workers on parental or disability leave were forced to go weeks or months without pay.

Public accounts documents recently tabled in the House of Commons show the government spent $400.5-million on the “settlement of Phoenix-related damages” during the fiscal year that ended on March 31, 2021. The number of current and former federal employees who received the money was listed as 324,346. This works out to an average individual payment of $1,200.

The total amount exceeds the $309-million spent by the federal government from 2009 to 2016 on developing the Phoenix system.

Since the problems first surfaced, the federal government has made more than $1-billion worth of announcements aimed at fixing things. The 2018 budget referenced the launch of discussions to “address the numerous grievances and legal actions” related to “the real mental and emotional stress and unacceptable financial impacts on public servants,” but it did not provide a cost estimate for resolving those issues. The 2018 budget also announced plans to move away from the Phoenix system.

Treasury Board President Mona Fortier’s office said in a statement to The Globe and Mail that the government has reached settlement agreements with all its public sector unions to compensate current and former employees for damages caused by the Phoenix system.

The $400.5-million listed in the public accounts is mainly related to an agreement with the Public Service Alliance of Canada (PSAC), which is the largest of the federal public sector unions. The amount covers general damages related to Phoenix, as well as compensation for the late implementation of 2014 collective agreements.

Ms. Fortier’s office said payments to the 324,346 people were largely made in March, 2021. Another round of payments, made in September, 2021, will be revealed in next year’s public accounts.

“The total cost for claims depends upon how many claims are made and the amount of each claim and these costs are reported annually in the Public Accounts of Canada,” Ms. Fortier’s office said. “The Government of Canada recognizes that the implementation of the Phoenix pay system has had an impact, directly or indirectly, on employees.”

The office noted that the government launched a separate claims process last month to compensate current and former PSAC employees who suffered “severe” effects because of Phoenix pay issues.

Chris Aylward, the national president of PSAC, said the Phoenix “pay fiasco” continues for federal public service workers who were overpaid, underpaid or not paid at all. He said it is important to remember that the compensation money is being paid to hundreds of thousands of workers who experienced pain and suffering because of pay problems.

Although former and retired PSAC members who were impacted by Phoenix can claim damages owed to them, he added, the ordeal will not be over until the government “puts in place a pay system that pays them accurately and on time every time.”

The federal government’s October, 2020, agreement with PSAC covered damages caused by the Phoenix system between 2016 and 2020. The agreement applied to about 175,000 current and 45,000 former employees represented by the union who were paid through the system. It also covered the estates of deceased employees.

Conservative MP and Treasury Board critic Kelly McCauley said the Liberal government should have acted immediately as the problems with Phoenix became known.

“It just shows the continued cost of Liberal ineptitude on the Phoenix fiasco,” he said. “It’s just another result of huge costs to the taxpayer and the cost to the daily lives of those in the public service affected.”

NDP MP Matthew Green said the federal government has put federal workers through “unnecessary stress and hardship.” He added that the pay system was a “disaster” from the beginning and Ottawa was slow to address its problems.

“It’s good to see that these workers have been compensated for the ordeal the government has put them through,” he said. “We certainly hope the government has learned some lessons from this and will put in place the proper safeguards to ensure this doesn’t happen to employees in the future.”

The federal government announced in September it had awarded a contract to U.S.-headquartered Ceridian HCM Holding Inc. to start replacing the Phoenix system with cloud-based software called Dayforce.

The $16.9-million, eight-year contract is part of a pilot project to move four government departments to the new software and then add more departments over time.

“Obviously we expect to be very successful and to solve the government of Canada pay challenges, because that’s what we do,” Ceridian’s Toronto-based chief executive, David Ossip, told The Globe in an interview at the time.

For subscribers: Get exclusive political news and analysis by signing up for the Politics Briefing.