By The Canadian Press

Fixing problems with Phoenix payroll system cost taxpayers $5.1 billion: official

Jun 23, 2025 | 3:14 PM

OTTAWA — A top federal official said fixing the payroll problems caused by Phoenix cost taxpayers more than $5 billion — and they’ll keep paying extra to run two public service payroll platforms at once as Ottawa weans itself off the problem-plagued system.

Alex Benay, associate deputy minister at Public Services and Procurement Canada, said the alternative to running the Phoenix system in tandem with its replacement, Dayforce, would have been worse.

“The unfortunate situation is there’s no easy path,” he said. “This is the one that’s going to impact employees the least.”

The other option, he said, would have been a more risky “big bang” deployment that would have switched roughly 350,000 public servants from the old system to the new Dayforce system all at once.

That’s what happened when the federal government introduced Phoenix, which led to nearly a decade of public service payroll errors and major lawsuits.

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“My commitment when I started this role was that I would not support that, for all the obvious reasons of where we are today, nine years later,” Benay said.

He added that the “deputy minister community” and ministers decided they “do not want to do another big bang.”

Benay said taxpayers likely spent about $5.1 billion to process the backlog of Phoenix errors that caused some public servants to be paid incorrectly — or sometimes not paid at all.

On June 11, Ottawa announced it had awarded a ten-year contract to Dayforce worth $350.6 million which includes a possible extension to 20 years.

“This is not another Phoenix. The work is being done at small scale and transparently,” Benay said. “We’re hoping that this is a smarter, more human-centred transformation that’ll be built to last.”

Parallel testing of the new payroll system will start next year and the first two departments to adopt the new system will be Shared Services Canada and Public Services Procurement Canada.

The initial amount spent to create Phoenix was $309 million, according to departmental spokesperson Jullian Paquin.

Phoenix’s origins date back to 2009. It was originally designed to decrease the cost of processing the federal government’s massive payroll.

But the project failed on launch after being rolled out with no project oversight, according to a federal audit. The original price tag provided by IBM to implement Phoenix in 2012 was $274 million.

— With files from Catherine Morrison

This report by The Canadian Press was first published June 23, 2025.

Kyle Duggan, The Canadian Press