The Public Service Pay Centre in Miramichi, N.B., the home of the Pay Pod people. THE CANADIAN PRESS/Ron Ward

Canada’s public servants have received more than $224 million in overpayments since the troubled Phoenix pay system was rolled out two years ago.

Public Services and Procurement Canada (PSPC) officials gave the two-year breakdown on overpayments to the Senate national finance committee this week but was unable to say when the money would be recovered.

Overpayments have become a flashpoint with federal unions because of the tax problems they have created for employees. They have negotiated flexible repayment plans for employees who don’t have to reimburse any money until their pay problems are resolved and they are paid properly.

PSPC estimates that there were $246 million in overpayments still outstanding by the end of 2017. About $106 million were uncollected overpayments that rolled over from the previous year. The error-prone Phoenix issued an additional $140 million in new overpayments over the course of the year.

In 2016, public servants received about $106 million in overpayments, which were generated by two pay systems. The old regional pay system issued overpayments of about $23 million and Phoenix, which first went live in February of that year, generated nearly $84 million in overpayments.

The old system was decommissioned after the second phase of Phoenix was rolled out in April.

PSPC was unable to say how many employees have received overpayments.

Overpayments have always been a problem for the government, and those and other errors were a key reason for upgrading to Phoenix. The problem, however, has become worse with Phoenix, which works best when processing pay in real time rather than transactions reported after the fact.

Most overpayments are created when acting assignments, promotions, terminations or people taking leave aren’t entered in real time. Employees could end up getting paid too much or receive two salaries. Term employees could continue to be paid after their contracts expire or retirees still get pay cheques after they retire.

The government has promised to put off the recovery of overpayments, emergency salary advances and priority payments until people’s pay files have been ‘reconciled’ and they are paid all the money they are owed by the employer.

Employees won’t have to make repayments until three conditions are met: all the money owed to them has been resolved and paid; they have three “stable pay periods” during which they are paid correctly; and a repayment plan is set up. Employees have the option of making repayments in instalments, as a lump sum or through deductions from pay cheques.

The decision required a change to the Treasury Board’s directive on terms and conditions of employment.

With the change in the directive, departments will now handle the recovery of emergency and priority payments the same way they do overpayments.

Overpayments come with tax implications for employees and the unions pressed the government for blanket tax relief so they only had to repay the amount they received and not the gross amount.

The government refused and instead came up with a compromise. Those who reported overpayments by Jan. 19 would only have to pay the net amount and their tax slips would be adjusted. PSPC, however, couldn’t process the claims of public servants who reported overpayments by the Jan. 19 deadline, so their tax slips could not be properly adjusted.

PSPC had about 18,000 reported overpayments by the end of December. It received another 8,000 when it announced the Jan. 19 deadline. The department was able to process 18,000 of the of 26,000 claims it received in time for the issuing of T-4 slips.

The union is still locked in its battle with the government for blanket tax relief for employees who received overpayments.

The government has agreed to review the “feasibility” of changing legislation for the 2018 tax year that would allow public servants who were overpaid to pay the net amount rather than the gross amount.