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 to which they are not entitled. The following situations are examples of overpayments:

Overpayments received in the current tax year

If you received an overpayment and it has been recorded in Phoenix in the same tax year or before the tax slip is produced, your tax slip and current year earnings will not include the overpayment amount and the repayment will be for the net amount.

If the tax slips have already been produced for that year then 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.

Overpayments received in a previous tax year

Within the past 3 years

Under new tax legislation proposed on January 15, 2019, by the Department of Finance Canada , your employer can adjust certain tax withholdings at source to reduce the overpayment amount owed by an employee if the overpayment is recorded in Phoenix within the 3 calendar years following the year in which the overpayment was received.

Once your overpayment is recorded in Phoenix, your tax slip will be amended to remove the overpayment and reflect the adjusted earnings. Original source tax deductions associated with the overpayment will be adjusted and the amended deduction amounts will be reported on the amended slip to be considered when your annual income tax return is reassessed. Your employer will submit the amended slip to CRA, and Revenu Québec if applicable, who will automatically reassess your tax situation and issue a refund of tax withholdings if applicable.

Outside the past 3 years

If the overpayment amount is recorded in Phoenix outside this 3 year threshold, the new tax legislation does not apply and the employer is required to deduct, and remit to the Receiver General, the 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 payment. After the end of the calendar year, your employer cannot adjust your tax deductions. Tax withholdings can be recovered when you file your personal income tax return.

Once your overpayment is recorded in Phoenix, your tax slip will be amended to remove the overpayment and reflect the adjusted earnings. Original source tax deductions associated with the overpayment will be reported on the amended slip and will be considered when your annual income tax return is reassessed. You must request a reassessment of your tax situation by CRA, and Revenu Québec if applicable; it is not done automatically. A refund of tax withholdings may then be issued.

Repayment options if you have an overpayment

Flexible measures have been put in place to help minimize financial hardships for employees for the repayment of overpayments related to Phoenix pay system issues. Once all outstanding transactions have been completed and you have received 3 consecutive accurate pays, you will be contacted by your compensation services and provided with repayment options.

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. This may be done by contacting compensation services.

The Public Service Pay Centre is responsible for managing overpayment recoveries for when a department or agency is served by the Public Service Pay Centre. Employees must must call the Client Contact Centre if they want more information on flexibilities.

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

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 should only start when:

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:

Repayment process for employees on leave without pay

If you are on leave without pay more than 5 consecutive days, repayment of any amounts owed will only start when:

Repayment process for former employees

If you are a terminated employee, overpayments are recovered 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. A personal cheque, money order or bank draft made payable to the Receiver General of Canada can be used to pay this amount.

Terminated employees who would like to verify if an overpayment is recorded in Phoenix or would like to arrange repayment are asked to call the Client Contact Centre at 1-855-686-4729.

Get information about your overpayment

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

If your department or agency is not served by the Public Service Pay Centre, your departmental compensation services should provide you with the required information.

Repayment schedule

You will be provided all reasonable options in agreeing to a repayment timeframe and the amount you can pay on your bi-weekly pay cheque.

In general, repayment should be completed within 3 years of a plan being established, or earlier if you are leaving the government. After all termination payments have been issued, if you have outstanding overpayment balance you will be asked to pay the remaining balance by cheque, money order or bank draft.

How to repay the full amount of your overpayment

Once you have received the details of your overpayment amount, a personal cheque, money order, or bank draft made payable to the Receiver General of Canada may be sent to:

If your department or agency is served by the Public Service Pay Centre, you may send your payment along with a completed Pay Action Request (PAR) form:

NOTE: Please refrain from inputting an existing case number on the PAR form

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

If your department or agency is not served by the Public Service Pay Centre, follow your departmental procedures.

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