Overpayments and options to repay them

From Public Services and Procurement Canada

This page provides information about overpayments and the new flexible repayment options available to you.

Meaning of the term “overpayment”

An overpayment is an amount of money paid to an employee that they are not entitled to receive, such as continuing to be paid for an acting that has been terminated.

Note: There are situations whereby overpayments will be recovered from the first available funds without requiring approval from delegated authority. These situations include accounting adjustments that result in administrative overpayments, for example, overpayments generated due to late acting as well as a number of other scenarios such as periods of leave without pay (LWOP) of 5 consecutive days or less submitted in the current pay period and overpayments less than 10% of an employee’s gross bi-weekly pay.

For a detailed listing of the overpayments to which the new flexibilities do not apply, refer to Compensation directives 2018-001, Subject: Overpayment, emergency salary advances and priority payments recovery.

Overpayments received in the current tax year

If you received an overpayment and it has been recorded in Phoenix in the current tax year, your tax slips and current year earnings will not include the overpayment amount and the repayment will be for the net amount (overpayment amount less deductions). Refer to Deduction codes for a detailed listing.

If the overpayment is not recorded in Phoenix in the same year it occurred or before the tax slip is produced, your original tax slip for that year will reflect the overpaid earnings and associated deductions. An amended tax slip will be produced when the overpayment is recorded in Phoenix.

Your amended tax slip will report your correct annual earnings for the year, as well as any tax withholdings on the overpayment. If your only income is your federal salary, you should be entitled to a refund of the tax withholdings on the overpayment when you file your tax return. Your employer will automatically submit the amended T4 to the Canada Revenue Agency, and, if applicable a Relevé 1, to Revenu Québec, who will automatically reassess your tax situation.

If the overpayment is recorded in a different tax year than when it occurred, you are required to repay the gross amount (amount you received prior to any deductions or credits) of the overpayment.

Under current tax legislation administered by the Canada Revenue Agency, your employer is required to deduct, and remit to the Receiver General, appropriate tax withholdings on any salary and wages paid to you regardless of whether the amount was paid in error. Your employer remits the tax withholdings on your behalf and the amounts are credited for the calendar year in which you received the overpayment. After the end of the calendar year, only you can recover the tax withholdings when you file your personal income tax return.

Overpayments received in a previous tax year

If you received an overpayment in a previous year, but discovered it in a following year, you will need to repay the gross amount of the salary overpayment as opposed to the net amount (gross less source deductions).

Once your overpayment is recorded in Phoenix, your tax slip will be amended to remove the overpayment and reflect the correct annual earnings. Original source deductions associated with the overpayment will be reported on the amended slip and will be considered when your annual income tax return is reassessed. A refund of tax withholdings will be issued if you are entitled to one.

Repayment options if you have an overpayment

Flexible measures are in place to help minimize financial hardships in the repayment of overpayments related to Phoenix pay system issues.

Flexible options for repayment of overpayments

Repayment options for overpayments, emergency salary advances and priority payments will be managed in the same way. Unless you choose an earlier repayment, recoveries will only start when:

You will be provided all reasonable flexibility to decide how you wish to make repayments. This includes delaying repayments until you receive monies owed, such as income tax refunds or the receipt of retroactive payments from the implementation of collective agreements.

If you consider yourself to be in a financial hardship situation, and have already agreed to a repayment plan before the measures were put in place, you can ask for your repayment plan to be modified to benefit from these flexible options. If you are served by the Public Service Pay Centre, submit a Phoenix feedback form. Under Step 1, select I am missing pay or have a concern about my pay. Then, under Step 2: What best describes your situation, select Overpayment (I have been paid too much). If you are not served by the Public Service Pay Centre, contact your departmental compensation advisor.

The Public Service Pay Centre is responsible for managing overpayment recoveries for departments and agencies that are served by the Public Service Pay Centre.

For departments and agencies not served by the Public Service Pay Centre, overpayment recoveries are coordinated through departmental compensation advisors.

For questions on how the process works, additional information on flexible recovery of overpayments, emergency salary advances and priority payments is available.

Exceptions to flexible repayment options

The flexible repayment measures do not apply to recoveries associated with terminations of employment or any end of term or casual contracts that are not extended or renewed. They also do not apply to the repayment of amounts owing that were the result of routine pay transactions, such as:

These measures do not apply to students. Departments and agencies will work with students to arrange a reasonable repayment plan.

Repayment process for employees on leave without pay

If you are on leave without pay, repayment of any amounts owed will only start when:

Repayment process for former employees

If you are a former employee, overpayments are recovered in full from first available funds on termination of your employment, as per the Directive on Terms and Conditions of Employment. If you still have an outstanding payment after all payments have been issued, you will receive a letter advising you of the outstanding amount and the penalty of not paying it within the prescribed time. A personal cheque, money order or bank draft made payable to the Receiver General for Canada can be used to pay this amount.

If payment is not received within the prescribed time, and an outstanding overpayment exists, your overpayment will be recovered from your pension entitlement. The Public Service Pension Centre’s default recovery plan is 10% of the gross monthly pension amount. If you are experiencing hardship, you will need to advise the Public Service Pension Centre of these issues and work out a more accommodating recovery plan.

If you want to verify if an overpayment is recorded in Phoenix or would like to arrange repayment before your return to work, contact the Client Service Centre at 1-855-686-4729.

If your department or agency is not served by the Public Service Pay Centre, follow your departmental repayment process or contact your compensation advisor.

Note: The flexible repayment measures do not apply to recoveries associated with termination of employment or the end of term or casual contracts that are not extended or renewed.

Get information about your overpayment

If your department or agency is served by the Public Service Pay Centre:

If your organization is not served by the Public Service Pay Centre, repayment plans will be coordinated through your departmental compensation advisors.

Repayment schedule

You will be provided all reasonable options in your repayment timeframe and the amount you will pay.

In general, repayment should be completed within 3 years of a plan being established, or earlier if you are leaving the government. A repayment period in excess of 3 years may be considered where required to reduce repayments below 10% of pay.  If you have outstanding overpayments upon termination, the remaining balances may be recovered from your pension payments.

How to repay the full amount of your overpayment

If your department or agency is served by the Public Service Pay Centre, mail a personal cheque, money order, or bank draft made payable to the Receiver General for Canada to:

Public Service Pay Centre Mail Facility
PO Box 6500
Matane QC G4W 0H6

You must include the completed letter provided to you by the Public Service Pay Centre, along with a completed pay action request form. Under sections 2 (work type) and 3 (sub type), select “Recovery of overpayments”.

If your organization is not served by the Public Service Pay Centre, follow your departmental procedures. Your personal cheque, money order or bank draft should be made payable to the Receiver General for Canada.

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