Overpayments and options to repay them
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:
- An employee is (or was) on Leave without pay (LWOP) and continued to receive their pay
- An employee’s acting pay did not stop when their acting assignment ended
- An employee received an allowance that they were not entitled to
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.
- Your repayment will be the net amount if the overpayment is recorded within 3 years in which it was received
- Your amended tax slip will reflect the adjusted earnings and deductions, where applicable
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.
- For more information refer to Canada Revenue Agency: Frequently Asked Questions – 2020 Tax Implications of Phoenix payroll issues
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:
- all your outstanding transactions have been addressed
- you have received 3 consecutive correct pay cheques
- you have confirmed a recovery agreement
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:
- overpayments of less than 10% of an employee’s gross bi-weekly pay
- overpayments resulting from past or late periods of leave without pay of 5 continuous days or less, for which the employee was already paid
- an administrative overpayment created as a result of the automated late acting process
- overdrawn leave (vacation/sick) upon termination of employment (for reasons other than incapacity/illness, death and layoff if applicable based on your collective agreement)
- cancellation of a leave with income averaging agreement by the employee, where the leave has been taken
- amounts advanced on behalf of the employee for union dues
- maternity/parental allowance, where the employee has not fulfilled their obligation as set out in their collective agreement or terms and conditions of employment
- deficiencies owed to public service health insurance plans, pension, supplementary death benefit or disability/long-term disability due to periods of leave without pay
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:
- you have returned to work
- all the transactions on your pay file have been completed
- you have received payments for 3 consecutive pay periods
- you have confirmed a recovery agreement
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:
- When an overpayment is processed, the Public Service Pay Centre will send you a letter confirming the amount owing on your account and
- Once all your outstanding transactions have been addressed and you have received three consecutive correct pay cheques you will be provided with options to set up an individual repayment plan
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.
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
- Under section 2 (work type), select “Cheque”
- Under section 3 (sub type), select “Cash Payments” to:
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.
- Flexible recovery of overpayments, emergency salary advances and priority payments
- Canada Revenue Agency Frequently Asked Questions - 2020 Tax Implications of Phoenix payroll issues
- Claims for expenses and financial losses due to Phoenix: types of claims
- Contact information - Canada Revenue Agency
- Revenu Québec Contact Us
- Date modified: