Ottawa

The president of Alterna Savings, a credit union that counts federal employees as half of its members, says the emotional and financial toll caused by the government’s troubled Phoenix pay system is getting worse.



Rob Paterson said the problems have gone beyond the initial delays, disruption and inconvenience of not getting paid properly.



He said Phoenix’s problems have now dragged on for more eight months and that even those with a savings cushion typically don’t have the money to cover more than a couple of months of household expenses in the event of emergency. He said the rule-of-thumb among financial planners is that you should have about three months in emergency savings.



“We are at the point when many would have exhausted their rainy-day funds,” Paterson said.



In fact, the Canadian Payroll Association released a survey this week showing nearly half of working Canadians live paycheque to paycheque.





About 48 per cent of the 5,600 working Canadians surveyed sai it would be hard to make ends meet if their paycheques were delayed even a week. Almost one in four don’t think they could come up with $2,000 if an emergency cropped up in the next month.



On top of that, Paterson said fall is when many people face the added financial pressures of paying for holidays and school tuition, and when they start saving for Christmas and planning RRSP or TFSA contributions.



Paterson said it’s important the government meet its Oct. 31 deadline to clear the backlog and get the dust settled around Phoenix. This week, officials at Public Services and Procurement Canada revealed it will cost as much as $50 million this year to fix Phoenix but insisted the department is on track to meet the Oct. 31 deadline.



“It’s starting to get worse not just because of the time but the time of year,” Paterson said. “People are sending their kids back to school; paying off vacation, university tuition. …We have had people in tears at our branches over this.



“This is a first for me. I have never seen a problem like this — and affect such a large group of individuals.”



He said the pay problems have now morphed into a tax problems, particularly for the public servants who have been overpaid or not paid at all. He said those forced to cash in RRSPs to make ends meet, for example, can’t replace the money they withdrew and will have to pay tax on it.



Marie Lemay, deputy minister at Public Services and Procurement Canada, said this week the department is racing to have as many pay problems resolved by year-end so T4 slips can be issued for the tax season. The Canada Revenue Agency has even posted tax advice for public servants affected by Phoenix glitches.



Alterna has long history with the public service dating back to 1908, when the Civil Service Co-op was created for federal employees. Today, public servants account for about half of its 130,000-strong membership and two-thirds are in Ottawa.



With that connection, Paterson said, Alterna tried to help public servants who face financial pressures because they haven’t been paid. So far, about 1,000 have sought help.



The first Phoenix rollout began in February and problems began to appear immediately but the government proceeded with the second rollout as planned in April.



By summer, Paterson said, public servants were showing up at Ottawa branches distraught and the credit union decided it needed a plan to help them. With bills to pay, members wanted to cash out RRSPs, set up lines of credit or stop payments on life insurance to make ends meet.



Alterna sent newsletters and launched a Twitter campaign aimed at public servants, offering stop-gap measures such as unsecured lines of credit with interest-only payments; overdraft protection; waiving fees for NSF cheques and offering skipped loan or mortgage payments.



He said people are also embarrassed when they can’t pay bills. Alterna will vouch for them, explaining to other institutions the financial problems are caused by Phoenix, which helps restore confidence among creditors.



“This is not their fault. They have done nothing wrong. The problem is with the employer making payroll,” Paterson said.



The government has promised to reimburse out-of-pocket expenses public servants may have faced because of pay foul-ups. The Treasury Board is unveiling a new claims process next week that will require public servants to provide receipts and documents to back up their claims.



The government has also agreed to let public servants who were overpaid repay that money slowly over time rather than clawing it back all at once.



But Paterson said the next challenge is what kind of longer-term solutions the credit union can offer “to bridge that gap a little longer” if the problems persist after the Oct. 31 deadline.



“This has been a testament to public servants because I don’t know how many other employees would continue to work if they were not getting paid,” he said.