Ten years after the federal government launched the Phoenix pay system, roughly 238,000 pay errors remain outstanding and a union representing federal workers says the crisis is far from over.
The Professional Institute of the Public Service of Canada released a report Monday warning that without significant changes, similar failures could occur in systems that affect millions of Canadians, including pensions and benefits.
A decade of damage
Phoenix went live in 2016 and quickly became one of the most costly administrative failures in Canadian government history, according to the union. Since 2017, the federal government has spent nearly $5 billion responding to Phoenix-related problems, according to PIPSC.
As of December 2025, approximately 238,000 pay errors or changes remain unresolved, with nearly half outstanding for more than a year. The system processes roughly 117,000 new transactions each month, and more than three-quarters require manual handling.
IBM, the system’s original developer, has received more than $650 million in total payments — a sharp expansion from an initial $5.7 million contract that was repeatedly amended.
Workforce cuts and outsourcing compounded the problem
Before Phoenix launched, more than 1,200 experienced pay advisors were eliminated, services were centralized, and documented risks were set aside, said PIPSC president Sean O’Reilly. When the system began to fail, the in-house expertise needed to fix it was gone.
“Before Phoenix was launched, more than 1,200 experienced pay advisors were eliminated, services were centralized, oversight was weakened, and documented risks were ignored,” said O’Reilly. “When the system began to fail, the expertise needed to fix it was no longer there.”
The Auditor General later confirmed that warnings about staffing capacity, system readiness, and implementation pace were raised before launch but were not acted on.
Current workforce reductions raise new concerns
PIPSC says the federal government’s current workforce adjustment measures — including early retirement, alternation, and layoffs — are expected to increase the volume and complexity of pay transactions significantly.
“Without additional stabilization and resourcing, the surge of WFAs risks generating new errors and expanding the backlog exponentially,” O’Reilly said.
The union also flagged a broader trend: government spending on professional services is expected to reach $26.1 billion this year, nearly double pre-pandemic levels. PIPSC says the growing reliance on outside contractors, while internal staffing shrinks, mirrors the conditions that preceded the Phoenix failure.
What PIPSC is calling for
The union is urging the federal government to take several steps, including signing a renewed damages agreement for employees affected since March 31, 2020, fully staffing the Miramichi Pay Centre before workforce adjustment pressures grow, keeping internal pay and IT expertise in place until replacement systems prove stable, and reducing outsourcing in favour of rebuilding in-house capacity.
“Ten years after the launch of Phoenix, it is still failing on a regular basis to deliver public servants’ paycheques correctly,” O’Reilly said. “This means taxpayers are funding stabilization efforts while also paying to build a replacement.”
PIPSC represents more than 85,000 public-sector professionals across Canada, most employed by the federal government.
