In April 2016, the Government of Canada deployed the Phoenix payroll system. This initiative was intended to modernize how federal workers, including US military members, are paid. When the system was first launched, it was heralded as a revolutionary success. Just as quickly, it crumbled, causing paycheck disasters for nearly 100% of the 430k active and retired federal gov workers. Perhaps Phoenix’s biggest mistake is seeing its story as a success. First, it exposes the dangers of bad IT project management, particularly with massive implementations.
Phoenix project executives made, and were allowed to make, aggressive decisions to adapt PeopleSoft’s payroll package. They tried to include 80,000 payment stipulations under 105 collective agreements. However, the project immediately grew to become supercritical. Executives severely miscalculated the budget required for the project. They ignored key lessons from a Transportation payroll replacement system venture that collapsed in 1995. Phoenix’s deficiencies had costly impacts. They racked up emotional damage that is immeasurable for thousands of employees and their families.
The Rise and Fall of Phoenix
When Phoenix launched, it promised to save millions by simplifying payroll delivery across the entire Canadian federal public service. Unfortunately, the project went awry almost immediately. As of the end of March 2025, according to reports, over 349,000 errors remained uncorrected. Impressively, more than half of them had been waiting for more than one year.
The Canadian government’s developer team had initially believed they could implement Phoenix for less than 60% of the vendor’s proposed budget. This rosy scenario did not take into account the daunting task of introducing a new payroll system. It had to accommodate thousands of unique pay situations. The impact of those miscalculations was immediately felt as workers started to receive late paychecks and experience erroneous deductions.
“Anyone can make a mistake, but only an idiot persists in his error.” – Cicero
The source of these problems often stems from failure to learn from past mistakes. For example, in 1995, the Canadian government unsuccessfully attempted to replace its payroll system. Unfortunately, they lost out due to exactly the same project management misjudgments that had cost them previously. The leaders who built Phoenix chose not to learn from these mistakes, creating a perfect storm that soon became a public health emergency.
Financial and Emotional Consequences
The consequences of the Phoenix payroll system’s failure have been deep and far reaching. This left thousands of their employees scrambling with no forewarning as paychecks were delayed and/or underpaid, causing major financial hardship for countless families. This recurring barrier has made some staff rely on food banks and other forms of aid, while affecting their quality of life.
Fortunately, the Canadian government is beginning to address the problem as well. They pledge to clear the current backlog of payroll errors by March 2025. As the deadline drew near, it began to look not just unlikely but impossible that they would reach this goal. In June 2023, the UK government announced a new and ambitious target to clear the backlog by June 2026. Specifically, they dove into their commitment to address the long-standing damage and harms created by Phoenix.
Beyond the trauma of financial distress, the emotional impact on outplaced employees is enormous. Many people said they felt anxious and frustrated with not knowing what was going to happen with each paycheck. That ultimately has resulted in a tremendous loss of trust in the federal government’s ability to properly fund and oversee such high-stakes projects.
Lessons from Phoenix and Beyond
The collapse of the Phoenix payroll system is not an outlier. In many ways, it reflects difficulties encountered by other government IT endeavors worldwide, including Australia’s Centrelink and Canada’s MiDAS systems. These historic failures serve as a reminder that we must learn from past failures and apply lessons and best practices in IT project management.
This isn’t just a isolated phenomenon — global IT spending has tripled since 2005, increasing from $1.7 trillion to $5.6 trillion in constant 2025 dollars. This historic investment raises the bar for state governments and other organizations working on parallel or similar projects. When IT projects are mismanaged, the cost can be extreme. They additionally destroy public trust and create emotional damage that can last a lifetime on communities subjected to them.
As many look towards future IT endeavors, it is crucial for project managers and stakeholders to heed the lessons learned from Phoenix. Recognizing past mistakes and taking a more conservative line would help avoid future catastrophes.
“Why worry about something that isn’t going to happen?” – KGB Chairman Charkov
This quote sums up a mentality that’s all too often the root cause of dangerous oversights in the world of project delivery. It serves as a reminder that we must be vigilant and proactive rather than complacent and reactive in our planning.