Correcting Phoenix: Collecting overpayments from workers easier said than done

Eight years after a payroll fiasco similar to Canada's experience with Phoenix, the Australian state of Queensland is still struggling to recover tens of millions of dollars paid in error to its employees.

Queensland Health embarked on its own payroll modernization plan when it centralized pay operations for 78,000 health care workers in 2010, using anIBM-provided payroll system.

Almost immediately the department discovered many people's pay was incorrect, and over the next two years they moved back to a more localized payroll system to avoid continuous issues with pay stubs.

Getting back the money from overpayments, however, has proven easier said than done.

Canada owed $295M

In the first four years after the 2010 launch, there were about $130 million (Australian) in overpayments, according to Michael Walsh, the executive director of Queensland Health. For smaller claims those of $200 or less the government granted an amnesty. But some $45 million still hasn't been recovered.

"It is a challenge," Walsh said. "It's always a challenge when people are being asked to repay an overpayment. It's a very long and complex process."

It's a problem as well for the federal government in Canada.

As of June 2017, some 59,000 employees owed the government a total of $295 million Cdn as a result of overpayments related to the IBM-customized Phoenix pay system, according to a November report from the auditor general.

Another 51,000 employees who were underpaid were owed $228 million at that time, the report said.

(The Phoenix system is different from the payroll product Queensland used, IBM says.In a statement to CBC/Radio-Canada, IBM said the situations "are not comparable," noting that in the case of Phoenix, IBM was hired to install and customize third-party commercial payroll software that the federal government had selected.)

'Completely incomprehensible'

But overpayments can be contentious, particularly when workers can't understand how the government calculates the amount.

Veronica Pyke was a nurse in a small town in southeastern Queensland in 2010 when she noticed her pay stubs were incorrect, with overpayments for overtime she wasn't entitled to but also underpayments that didn't take into account on-call work she had performed.

She left Queensland Health to join the union representing nurses and midwives later that year with her issues still unresolved, but in 2011 she got a letter from the government telling her she owed $1,800 (Australian) in overpayments.

To this day I've not been able to make an argument that satisfies them to say I don't believe I owed that. It's very hard to make that argument now that they have the money.- Former nurse John Gunner

She chose to have a case manager assigned because she didn't agree with the amount, but she said it was another five years before anyone contacted her again. When they did, she asked for documentation to explain the $1,800 amount.

"I got sent an enormous wad of paperwork that was completely incomprehensible," Pyke said.

"Unless you worked in the pay office, there was no way you could know what all the pluses and minuses meant, and there were no specific dates for it either."

Pyke tried to get a face-to-face meeting before eventually handing the dispute over to the union. She says eight years after she first identified the problem, the issue still hasn't been resolved.

Payroll debacle led to fights between government, nurses about overpayments

8 years ago

Duration 0:57

Australian registered nurse John Gunner disputed the allegation he'd been overpaid $2800 because of problems with a flawed payroll system, but lost the fight when the government clawed back annual leave credits to recoup the money.

Unions upset over clawbacks

Even money the government has recovered has come at a cost, say workers and union representatives.

In 2012, the ruling Labor Party in Queensland was defeated and the opposition Liberal National Party took power. It introduced legislation that allowed the government to take back money owed from current employees.

John Gunner, a nurse at Queensland Health until 2017, was told he owed about $2,800. When he went through his pay stubs, however, he said couldn't find any evidence that there was anything unusual.

But the government assigned him a case manager, who made the decision to take the amount out of his six weeks of leave balance.

"To this day, I've not been able to make an argument that satisfies them to say I don't believe I owed that. It's very hard to make that argument now that they have the money," he said.

Police involved in fraud investigations

Beth Mohle, the secretary for the Queensland Nurses and Midwives Union, said 88 health-care workers were actually visited by police because of fraud allegations in relation to overpayments.

While some of those cases did involve people who were taking money they weren't entitled to, "a significant number" were falsely accused, Mohle said.

"There have been significant financial impacts for individuals who will never recover from this," Mohle said.

Payroll consultant Malcolm Thatcher said any way an authority collects overpayments will be fraught with challenges.

"Underpayments are easy to fix, overpayments not so easy to fix, because of the very human issues on asking for money back," Thatcher said.