Subject: Procedures for Overpayment Recoveries in Preparation for Conversion to Phoenix
| Date: September 26, 2014 Updated December 11, 2014
1.1. The purpose of this compensation directive (CD) is to provide compensation advisors with procedures for recovering salary and wage overpayments as well as debts to the Crown due to financial liability and penalties.
2.1. This CD supersedes the following:
- ARCHIVED Services Pay Directive: 1978-223 (52) - Recovery of Salary Overpayments
- ARCHIVED Services Pay Directive: 1990-003 (02) - Maternity Supplementary Benefit Overpayment
3.1. In preparation for the implementation of the new Government of Canada Pay System (Phoenix) starting in July 2015, departments and agencies are required to review all cases of recoveries for overpayments to comply with system requirements for conversion to Phoenix. The CD and Job Aid have been created to assist compensation advisors with their review and to provide Regional Pay System (RPS) data entry procedures for overpayment situations.
4.1. The Treasury Board Secretariat (TBS) Directive concerning the recovery of overpayments can be found in the Directive on Terms and Conditions of Employment under part 3, section 15 of the Appendix.
4.2. Canada Revenue Agency (CRA) and Revenu Québec (RQ) have specific regulations on salary overpayments due to clerical and administrative errors or unfulfilled obligations.
4.3. This CD and Job Aid must be read in conjunction with the TBS bulletin "Recovery of Amounts Due to the Crown" dated December 16, 2011, and the following directives:
- ARCHIVED Services Pay Directive 1984-16 (10) - Collection of Overpayments (Non-reversible Deductions),
- ARCHIVED Services Pay Directive: 1991-037 (24) - Changes in the Leave Without Pay Regulations,
- ARCHIVED Services Pay Directive : 1991-056 (42) - Change in Hours of Work,
- ARCHIVED CD 1996-038 - Non-Regular Work Week Leave Without Pay Reporting (LWOP),
- ARCHIVED CD 1997-008 - Retroactive Processing for Basic Pay - Struck Off Strength and Temporarily Struck Off Strength (Phase 1),
- ARCHIVED CD 2002-001 - Parental Leave Without Pay, Parental Allowance, Leave Without Pay for the Long-Term Care of a Parent and Leave Without Pay for the Care of Immediate Family,
- ARCHIVED CD 2008-020 - Recovery of Entitlements and Net Overpayments from Supplementary Payments,
- CD 2011-020 - Edit to the leave without pay (LWOP) Code 302: "Fixed Hours Not Worked",
- CD 2012-020- Procedures for Work Force Adjustment, and
- CD 2013-020 - Change of Employer - Procedures
5. Procedures and Instructions
| 5.1. Effective immediately, ongoing overpayment recoveries using the Entitlement Recovery (ENR) pay transaction are only permitted if the full amount owing will be recovered by June 3rd, 2015. If the full amount will not be recovered in time, Regional Pay Office intervention will be required. See the Job Aid and PPIM 14-6-4 or PPIM 4-4-18-4-1, PPIM 4-4-18-4-2 and PPIM 4-4-18-4-3 of the Personal Pay Input Manual for further details.
5.2. Deduction code 540 Other debts owing to the Crown must only be used for recovery of overpayments due to unfulfilled obligations. See the Job Aid for further details.
6.1. Any inquiries on the information contained in this directive should be addressed to your Public Works and Government Services Canada (PWGSC) Compensation Services Office.
| September 26, 2014 Updated December 11, 2014
The purpose of this document is to provide compensation advisors with additional information on identifying overpayments and processing recoveries.
The job aid is divided by topic to allow for easy retrieval of information.
Unless otherwise specified, all scenarios and examples are based on a Monday to Friday regular full-time work week schedule.
Note: The dates in the document represent the National Pay Processing Schedule. House of Commons (HOC) and Canada Revenue Agency (CRA) should refer to the National Pay Processing Schedule when using this job aid.
Table of Contents
- 1.0. Identifying the Type of Overpayment
- 1.1. Clerical or Administrative Errors
- 1.2. Unfulfilled Obligation
- 1.3. Financial Liabilities/Penalties/Debts
- 2.0. Processing Recovery of Overpayment
- 2.1. Clerical or Administrative Errors
- 2.2. Unfulfilled Obligation
- 2.3. Financial Liabilities/Penalties/Debts
1.0. Identifying the Type of Overpayment
When an overpayment occurs, compensation advisors are responsible to identify the type of overpayment and apply the correct recovery process. There are three types of overpayments; two that are salary overpayments and one non-salary overpayment.
- Clerical or Administrative Errors
- Unfulfilled Obligations
- Other Debts and Financial Liabilities
1.1. Clerical or Administrative Errors
A clerical or administrative error occurs when a payment is made to an employee but the employee was never entitled to receive the payment (no fault of the employee). Examples of clerical or administrative errors are:
- incorrect salary rate calculated on promotion, transfer or acting, etc.,
- a keying error on the amount or number of days to be paid, or on extra duty pay,
- a statutory pay increment processed too early,
- issuing the same payment twice to an employee,
- regular pay not ceased on time for leave without pay (LWOP) or Struck off Strength (SOS), and
- entitlements not ceased on time.
| Canada Revenue Agency (CRA) and Revenue Québec (RQ) do not consider salary overpayments due to clerical or administrative errors as salary or wages and therefore tax slips must always be adjusted for the year of the overpayment. When the recovery of the overpayment is fully completed within the same tax year as the overpayment, the tax slips are adjusted automatically in the Regional Pay System (RPS). In cases where the overpayment is not fully recovered in the tax year in which it took place, the amendment of tax forms should be done by regional pay offices.
1.2. Unfulfilled Obligation
Unfulfilled obligations occur when an employee did not perform the duties for the required period (employee’s choice). It is not an error as the employee was entitled to receive the original salary at the time it was paid but now has not fulfilled the requirements. Examples of unfulfilled obligations are:
- unfulfilled contract: an employee who terminated employment but has an unfulfilled contract such as maternity/parental top up payment; Leave with Income Averaging (LIA); education leave allowance,
- New appointment within the period covered by Work Force Adjustment (WFA) allowance
CRA and RQ consider the salary received by the employee for unfulfilled obligations as salary or wages and therefore the tax slips are not adjusted (i.e. income tax, provincial tax, Canada Pension Plan (CPP)/Quebec Pension Plan (QPP), Employment Insurance (EI)). Unfulfilled obligations are always reported in RPS with deduction code 540 Other debts owing to the Crown. A repayment letter must be issued by the employer at year end indicating the amounts recovered from the employee in that year.
1.3. Financial Liabilities /Penalties/Debts
These types of overpayments occur when an employee damages, loses or abuses government assets under their responsibility such as tools, credit cards, and computers, etc. When recovering these types of debts, Contracting Authority's (CAs) must use the appropriate code as found in the PPIM 9-5-4 such as code 504, Liability of employee, loss or damage of public property, code 508, other charges for loss of identification card, tools and code 544: Recovery of student loans; to name a few. Please refer to PPIM 9-5-4 for the full list of codes for other debts.
For these types of overpayments, since they are non-salary, tax slips are never amended (i.e. income tax, provincial tax, CPP/QPP, EI), repayment letters are never issued, and code 540 should never be used to recover the debt.
2.0. Processing Recovery of Overpayment
2.1. Clerical or Administrative Errors
The compensation advisor will enter the appropriate pay transactions in RPS to correct the account if it’s still in error and if possible without producing further overpayments or unexpected recoveries. Compensation advisors should contact the Regional Pay Office if they require assistance in correcting the account.
| 2.1.1. Overpayment Fully Recovered in RPS by June 3rd, 2015
If an overpayment occurs and the full amount owing will be recovered in RPS by June 3rd, 2015, the recovery can be entered in RPS on the Entitlement Recovery (ENR/PAC18R) pay transaction (Please refer to PPIM 14-6-4 or PPIM 4-4-18-4-1, PPIM 4-4-18-4-2 and PPIM 4-4-18-4-3 for details on how to complete an ENR/PAC18R transaction).
In August 2014, an administrative error occurred and created an overpayment of $2000 for an employee. This employee provided proof of hardship and was granted a repayment schedule of $200 per pay for 10 pay periods. Since the full amount of the overpayment will be recovered in RPS before June 3rd, 2015, an on-going ENR/PAC18R pay transaction will be created.
| 2.1.2. Overpayment Not Fully Recovered in RPS by June 3rd, 2015
If an overpayment occurs and the amount owing will not be fully recovered in RPS by June 3rd, 2015, Regional Pay Office intervention is required since on-going ENR/PAC18R pay transactions will not be converted to Phoenix. The compensation advisor must complete a PWGSC-TPSGC 2549 Personal Pay Input and Time Summary Form and submit to the appropriate Regional Pay Office for action. (Please refer to PPIM 3-5 for details on how to complete the form). DO NOT REPORT AN ENR/PAC18R ONLINE.
The PWGSC-TPSGC 2549 form must contain the following when submitting to the Regional Pay Office:
- Specify that the overpayment was due to an administrative error;
- Total amount of overpayment;
- Negotiated repayment schedule, if applicable; and
- Authorizing s.33 signature.
If the compensation advisor does not indicate the repayment schedule when applicable, the full amount of the overpayment will be recovered from first available funds.
| The employee can also decide to pay the full amount or a partial amount by personal cheque. In this case, the CA will need to input a CRT for the amount of the cheque.
When the Regional Pay Office receives the completed PWGSC-TPSGC 2549 form, they will net the overpayment amount and create an Arrears Recovery (ARR) transaction with code 566. This transaction will be converted into Phoenix.
It is March 2015 and a compensation advisor discovers an overpayment due to an administrative error in the amount of $5000. The compensation advisor has been informed that the employee provided proof of hardship and was granted a repayment schedule of $100 per pay. The compensation advisor will complete form PWGSC-TPSGC 2549 with the following information, and submit to the Regional Pay Office:
- The overpayment was due to an administrative error;
- Total amount of overpayment of $5000;
- Negotiated repayment schedule of $100 per pay; and
- Authorizing s.33 signature.
| It should be noted that the negotiated repayment amount may differ once the overpayment has been netted. The PO may need to adjust the per pay amount accordingly to be as close to the indicated recovery schedule amount without going over. The CA may also need to advise the employee that the amount has changed slightly.
| It is May 2015 and a compensation advisor discovers an overpayment due to an administrative error in the amount of $2100. The compensation advisor has been informed that the employee provided proof of hardship and was granted a repayment schedule of $75 per pay. The compensation advisor will complete form PWGSC-TPSGC 2549 with the following information, and submit to the Regional Pay Office:
- The overpayment was due to an administrative error;
- Total amount of overpayment of $2100;
- Negotiated repayment schedule of $75 per pay; and
- Authorizing s.33 signature.
| Once the Pay Office creates the overpayment, the Net amount is now $1750. If you take $1750 and divide it by $75, you get 23.333 Pay Periods. It would then be rounded up to 24 Pay Periods. $1750/24=$72.92 to be taken per pay. The CA will advise the employee that the deduction will be $72.92.
2.2. Unfulfilled Obligation
If an overpayment occurs due to unfulfilled obligations for an active employee, the recovery will be entered on the Deduction Commence (DEC/PAC16C) pay transaction with deduction code 540 - Other debts owing to the Crown and, once the overpayment has been fully recovered, or at year end, the compensation advisor will produce and send a Repayment Letter to the employee for income tax purposes. Deduction Commence pay transactions with deduction code 540 will be converted to Phoenix should there be an outstanding balance to be recovered.
| If the employee is inactive, complete form PWGSC 2549 with 16 C 540 for the full overpayment amount. Input in remarks that it’s for Unfulfilled Obligation. PO will then input into the SRS screen. Tax slips will not be amended.
2.3. Financial Liabilities /Penalties/Debts
When a compensation advisor is notified of an amount owing due to financial liability, penalties or debts for an active employee, they will enter the recovery on the Deduction Commence (DEC/PAC16C) pay transaction with the applicable overpayment/debt deduction code (other than code 540) from PPIM 9-5. There is no impact on tax slips (T4/REL1) and no repayment letter is ever issued.
Appendix A - Template of “Repayment of Salaries and Wages” Letter for Employee
Repayment of salary and wages
Protected "B" (when completed)
Date: MM DD, YYYY
To: Add the name and address of the employee
Subject: Repayment of salary and wages for which there was no amended T4 produced (Add employee’s Social Insurance Number (SIN) here)
This is to confirm that the gross amount of $ ________ has been recovered from (Insert full name and social insurance number of the employee) in the taxation year ____ in respect to an overpayment incurred in taxation year(s) ____.
Details of the Overpayment
Gross Employment Insurance (EI) insurable earnings:
Gross Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) pensionable earnings:
This amount has not been reduced from the tax slips issued to this individual for that year.
This letter is valid for income tax purposes.
(Insert the name of the compensation advisor)
(Insert the name of the Department)
- Date modified: