Phoenix Pay System Turns Nine: The Billion-Dollar Breakdown

OTTAWA, ON, Feb. 27, 2025 /CNW/ - For nine years, the Phoenix Pay System has stood as a stark warning about the true costs of outsourcing critical government services. What began as a $5.8 million contract with IBM has now ballooned to over $650 million through more than 50 contract amendments - all while failing to deliver its basic function of paying public servants correctly and on time.

As a result, workers are going into debt as a result of ongoing financial insecurity and years of incorrect and unpredictable pay. Their futures are being impacted as their credit scores plummet – some have even lost their homes. Pay errors are also repeatedly reported on T4 and other financial reports, causing difficulties with the CRA and provincial tax agencies, tangling the web even further.

"The government's obsession with outsourcing has created a costly spiral of failure," said the Professional Institute of the Public Service of Canada (PIPSC) President, Sean O'Reilly. "After spending hundreds of millions on IBM for Phoenix, we're now watching history repeat itself by once again choosing costly outsourcing for the new pay system, instead of leveraging in-house expertise."

"Meanwhile, nearly 300,000 pay transactions remain unprocessed, and that number is only rising." he continued. "With two-thirds of these cases being over a year old. This is not value for money - this is throwing good money after bad."

The mounting costs extend far beyond direct contracts. The 2024 budget includes another $135 million investment for HR improvements and the next generation pay system. This is on top of the $517 million allocated in 2023 and $521 million in 2024 just to maintain staffing at the Pay Centre to handle the ongoing backlog. The government has also spent millions more on consultants, including $27.7 million to McKinsey to "help improve" a system that fundamentally doesn't work.

"Public servants deliver essential services that Canadians rely on every day, yet for nine years, they've been fighting just to receive their basic pay," noted the Canadian Association of Professional Employees (CAPE) President, Nathan Prier. "From day one, we warned about the risks of outsourcing such a critical system. A rush to find the cheapest option has now cost Canadians more than $3.5 billion and counting. We urged consultation and stressed the importance of maintaining internal expertise. Instead, the government eliminated 1,200 experienced pay advisor positions and replaced them with 550 positions at a centralized location."

"The results speak for themselves," he continued. "Thirty percent of public servants continue to experience errors in their basic pay, and thousands wait years for proper processing of promotions, transfers, and retirement benefits. We are long overdue for a renewed damages agreement to compensate our members, which the Treasury Board has been promising but intentionally stalling."

The Phoenix Pay System demonstrates what happens when governments prioritize outsourcing over investing in their own workforce. Public servants have the expertise, dedication, and understanding of complex government operations that external contractors simply cannot match. After nine years and billions of wasted taxpayer dollars, it's time for the government to recognize that strong public services require investment in public servants, not an endless cycle of expensive external contracts that fail to deliver.

About CAPE 
With more than 25,000 members, the Canadian Association of Professional Employees (CAPE) is one of the largest federal public sector unions in Canada, dedicated to advocating on behalf of federal employees in the Economics and Social Science Services (EC) and Translation (TR) groups, as well as employees of the Library of Parliament (LoP), the Office of the Parliamentary Budget Officer (OPBO) and civilian members of the RCMP (ESS and TRL).

About PIPSC 
The Professional Institute of the Public Service of Canada (PIPSC) was founded in 1920.  With over 75,000 members, the Institute is the largest union in Canada representing scientists and professionals employed at the federal and some provincial and territorial levels of government.

SOURCE Professional Institute of the Public Service of Canada (PIPSC)

Media contacts: Canadian Association of Professional Employees (CAPE), [email protected]; Professional Institute of the Public Service of Canada (PIPSC), [email protected]