The Canadian federal government implemented the Phoenix Pay System under the guise of improving modernization of government payroll. It has now become a shorthand for botching Information Technology initiatives. The project started in April 2016 with a simple objective: to replace an archaic pay system. To do this, the team adapted PeopleSoft’s out-of-the-box payroll package, adapting it to 80,000 pay rules based on 105 collective agreements with federal public-service unions. After its implementation, the system soon faced critical issues. These realizations led to millions of erroneous payroll payouts across the affected group members that lasted nearly 10 years.
This initiative marks the Canadian federal government’s second major effort to reform its payroll system. No wonder the original attempt went down in flames way back in 1995. The new project managers dived headlong into the Phoenix project, failing to learn important lessons from their prior flop. To do this, they simply ignored the historical justification for previous failures. Since the implementation of the Phoenix Pay System, nearly 70% of the 430,000 current and former federal employees have experienced paycheck errors. This has led to tremendous hardship for those in her wake.
Overview of the Phoenix Pay System
The national initiative really zoomed in on creating a pay system that’s really efficient and reliable. This new system would ensure that employees are paid fairly and on time. Instead of bringing these much needed results, the system has been riddled with issues since it was first rolled out.
To give some context, the disastrous Phoenix Pay System went into production in April 2016. Soon after, it “went supercritical,” which in layman’s terms means its failure quickly became catastrophic. This resulted in billions of dollars in payroll mistakes, with over half of all federal employees impacted. At that point—March of 2025—advocates estimate that more than 349,000 mistakes will remain uncorrected. By this time, more than half of these problems will have been stuck for more than a year.
The project had a grossly unrealistic budget – originally scoped to be under 60% of the vendor’s proposed overall costs. In a panic to save costs, government officials made key decisions that would later prove disastrous for the project’s success. They cut out or delayed key payroll services. They limited system testing and integration, eliminated contractors and government staff while scaling back testing plans, and waived milestone pilot testing prior to full deployment.
Consequences of Mismanagement
More to the point, the impacts of the disastrous Phoenix Pay System has been disastrous and extensive. This project’s gross mismanagement has led to tremendous harm. Now, thousands of federal employees are facing financial ruin from errors in their payrolls. To date, more than 3-quarters of those paid through Phoenix have experienced paycheck irregularities. This avoidable blunder sheds light onto the perils of systemic IT project management malaise that infects far too many government departments and agencies.
A report from NTT DATA indicates that 80% of organizations acknowledge that “inadequate or outdated technology is holding back organizational progress and innovation efforts.” Even with growing investments in IT, success rates for software have been on the decline. This trend begs the question of whether we’re making an impact with our prevailing approach to project management and adoption of new technology.
Furthermore, the Phoenix Pay System disaster is not a one off event. Similar failures have stymied other government IT projects. High-profile failures include Michigan’s MiDAS unemployment fraud detection system and Australia’s Centrelink “Robodebt” automated welfare recovery program. Each example highlights a common thread of poor planning and management for massive IT projects.
“Anyone can make a mistake, but only an idiot persists in his error.” – Cicero
Lessons Not Learned
The impending failure of the Phoenix Pay System should be a cautionary tale to future IT projects. Armed with hindsight and a laundry list of known failures, far too many organizations continue to ignore the most basic lessons gleaned from previous failures. The decision to proceed with Phoenix without addressing the documented issues from the earlier payroll system replacement reflects a troubling pattern in project management.
“In fact, experts told us learning from and institutionalizing past mistakes is crucial to improving future outcomes.” “To Engineer Is Human: The Role of Failure in Successful Design,” by Henry Petroski, emphasizes how learning from failures is crucial to achieving success in engineering and design endeavors.
As the Canadian government continues to try and clear the backlog of pay mistakes. There’s a growing storm of criticism that it’s been mismanaging the Phoenix project. The commitment to clear these issues by March 2025 has been met with skepticism given the persistent nature of unresolved cases. Over half of these errors have been pending for more than a year. Existing employees are in an even worse position to know what they’re being paid.
The Road Ahead
Going forward, confronting the dislocations caused by the Phoenix Pay System will demand more than technical repairs. It requires a complete, radical transformation in the culture and practice of how government agencies do IT projects. When we lead with thoughtful planning and rigorous testing, we set ourselves up for success. This strategy addresses a clearer purpose — driving renewed confidence for federal employees.
The past year’s hard-won lessons must be the blueprint for what comes next. Through honest reflection on their past failures, organizations can prevent future breakdowns. In doing this, they should promote the development and use of strategies that prioritize accountability and transparency.