Ottawa Warns Former Federal Workers May Face Debt Collectors Over Phoenix Pay Overpayments

Background

The Canadian government is cautioning former federal employees who received overpayments through the troubled Phoenix pay system that collection agencies may soon pursue them if debts remain unresolved. The move has drawn objections from public service unions, which say many affected workers did not realize they were overpaid and are being unfairly targeted.

Details of the Issue

Letters sent from federal departments warn that outstanding pay overpayments must be repaid or risk being handed to private collection firms. Ottawa argues that since the public purse funded the erroneous payments, recovery of these funds is a legal obligation.

The Phoenix pay system, launched in 2016 to modernize government payroll operations, has instead caused widespread chaos. Tens of thousands of public servants were underpaid, overpaid, or left unpaid due to persistent software and administrative errors. Despite years of fixes and billions spent, issues continue to surface even after some employees have left the public service.

Union Response

Public service unions have sharply criticized the government’s approach. They argue it is unreasonable to send former employees' cases to collections, particularly when overpayments stemmed from system flaws beyond workers’ control. Unions insist that Ottawa must ensure all debts are verified and communicated clearly before taking any enforcement steps.

“These individuals did nothing wrong,” union representatives said. “They should not face collection threats for the government’s own mistakes.”

Union leaders are calling for a fair and transparent process that accounts for hardship cases and administrative errors. They emphasize that some individuals are still waiting for corrections to their original pay records.

Government Position

Federal officials maintain that departments are providing proper notice and repayment options before referring any cases to collection agencies. The Treasury Board Secretariat has stated that departments only pursue recovery when there is clear evidence of overpayment and once all internal avenues are exhausted.

The government insists that employees and former employees have access to support services and repayment plans to minimize financial strain.

Continuing Fallout

The Phoenix pay system remains one of the largest public administration failures in Canadian history. The federal government has invested heavily in compensation funds, system repairs, and staff resources to address its fallout. Yet, nearly a decade later, the consequences are still unfolding—now extending to debt recovery actions against those once caught in its errors.

“We understand this is frustrating,” a Treasury Board spokesperson noted, “but recovering funds paid in error is necessary to ensure fairness and accountability across the public service.”

Author’s summary: Former federal workers risk collection action over Phoenix pay system overpayments, prompting backlash from unions demanding fairness and human treatment in debt recovery.

The Globe and Mail — 2025-11-28