Debi Daviau, right, is the president of the Professional Institute of the Public Service of Canada. THE CANADIAN PRESS/Sean Kilpatrick

The besieged Phoenix pay system can’t handle all the overpayments that Canada’s public servants scrambled to report by last week’s deadline before tax time, say union leaders.

Debi Daviau, president of the Professional Institute of the Public Service of Canada (PIPSC), said the union was informed that Public Services and Procurement Canada has “capacity” problems.

She said the department dedicated 200 people to process the flood of overpayments reported by Jan. 19 but “many won’t get done” by the end of the month.

“They have 200 people processing overpayments to get as many processed … but they are not even going to get the ones filed by Jan. 19 processed on time,” she said.

It’s another frustration on a pile of problems for public servants, who are increasingly becoming fed up with pay woes that never seem to get fixed.

A growing number already had little faith that reporting their overpayments, whether by phone or online, would be properly recorded by the fickle system and overworked compensation advisers to meet the Jan. 31 deadline.

It’s all raised much speculation whether the government will even make the March 1 deadline for T-4 slips and, if it does, whether they will be riddled with errors.

Reported cases that get processed will only have to repay the money or net pay they received in overpayments and will be issued accurate T4 slips.

Those whose overpayments aren’t processed won’t have their T4 slips adjusted and they will have to pay the gross amount of the overpayment – which includes deductions made at source on their behalf such as CPP and EI.

What’s infuriating, says Daviau, is the government proposed this process of having employees report their overpayments by Jan. 19 to ensure they would be recorded on time for tax purposes.

She argued employees who met the deadline shouldn’t be penalized because the government can’t make its deadline.

“This is not what was promised to us,” said Daviau. “The intent was a promise that if you reported your overpayment by the deadline it would be processed on time and you would pay the net amount and not the gross.”

“We had people scrambling to get these in by the deadline. … They spent hours calling the call centre many times a day, jumping through fiery hoops to get recorded on time. It was just wrong to let people believe this would solve their problems.”

The unions opposed public servants having to re-pay the gross amount of the overpayments from the start. They pressed for a blanket exemption from tax rules so employees would only have to pay the net amount.

As it stands, employees who receive overpayments can repay the net amount they received if the money is given back in the same tax year. Beyond that, they must repay the gross amount.

The government, however, 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 ne adjusted. The overpayments could be reported by calling the Phoenix call centre or online using a Phoenix feedback form.

The Public Service Alliance of Canada (PSAC) is doubling down on the call for blanket exemption. PSAC President Robyn Benson appealed to Treasury Board President Scott Brison to “stop gouging public servants” and seek a remission order from his cabinet colleague, Revenue Minister Diane Lebouthillier, to exempt those with overpayments in 2017 of tax liability.

Lebouthillier has the power to issue a remission order if a tax liability or penalty is considered unreasonable, unjust or not in the public interest to collect.

“A complete exemption – through a remission order – is the only way forward … in this fight to stop the unfair recovery of gross pay,” said Benson.

“We have been clear that, under no circumstances, should our members be forced to hand over more money than they received in overpayment. The minister has within his power the ability to solve this problem and that is what we are asking him to do.

Brison did not comment on the remission order request. His office said PSPC is processing overpayments as fast as possible and urged employees to continue reporting overpayments as quickly as they can.

“We continue to work closely and collaboratively with public sector unions, and we take any suggestion that might help limit the financial hardship faced by our employees very seriously,” said Jean-Luc Ferland, a spokesman for Brison, in an email.

But PSPC, the federal pay master, gave itself wiggle room from the start. The department issued a pay advisory that warned those racing to meet the Jan. 19 deadline that “every effort will be made to ensure that you will only have to pay the net overpayment rather than the gross.”

The government argues employees won’t have to pay more than they receive because PSPC will only recover overpayments – for the gross amount -in the summer of 2018, after Canada Revenue Agency has processed 2017 tax returns. By then, CRA will have reassessed and credited their tax accounts and sent tax refunds.

So far, PSPC is not commenting. It has been unable to say how much money has been issued in overpayments or how many people reported overpayments by the Jan. 19 deadline.

At its last Phoenix update, the department reported receiving about 18,000 reported overpayments by the end of December.

Last August, a PSPC internal report was circulated that showed overpayments accounted for the second largest volume of cases in the backlog and at that time there was about 31,900 reported cases.

The most common overpayment situations are employees moving to a new job and getting paid twice or continuing to get paid after they quit, retire or finish a contract.