Agreement on the taxability of the Phoenix lump-sum payment

Hello,

In October 2020, the Government of Canada reached an agreement with the Public Service Alliance of Canada (PSAC) which provided compensation to eligible employees (current and former) for the damages caused by the implementation of the Phoenix pay system and for the late implementation of the 2014 PSAC collective agreements. The lump-sum payment consisted of up to $1,500 in recognition of the issues that arose following the implementation of the Phoenix pay system and up to $1,000 for the delay in implementing the 2014 PSAC collective agreements. Most PSAC members received their payments in 2021.

The Canada Revenue Agency (CRA) has advised us that they have reached a settlement agreement with a member of the Public Service Alliance of Canada (PSAC) regarding the taxability of the Phoenix lump-sum payment. As part of the terms of settlement, it was agreed that the portion of the payment for stress, aggravation, and pain and suffering (up to $1,500) is not taxable. The lump-sum payment for the late implementation of the 2014 collective agreements (up to $1,000) is taxable under the settlement.

The settlement agreement only applies to the lump-sum payment received by PSAC members under the Phoenix pay system damages agreement (2020). The settlement terms will be applied to PSAC members who have filed (or will file by the April 30, 2024, deadline) an objection with the CRA on the tax treatment of the portion of up to $1,500 of the lump-sum payment.

The settlement cannot be extended to other Phoenix Damage Agreements because the issue of the taxability of payments made under other damage agreements is a question of fact and would be considered on a case-by-case basis. An employee who disagrees with the tax treatment of compensation received under another Phoenix Damage Agreement has the option to file a notice of objection within the specified timelines to do so. CRA would undertake an examination of all the facts and circumstances.

Given that taxation is a personal matter, managers should not provide tax advice. As the CRA is responsible for tax administration, further information is available at:

• File an objection
• Processing times and complexity levels - Income tax and GST/HST objections
• File an objection – Income tax
• Frequently Asked Questions – 2021 Tax Implications of Phoenix payroll issues

Thank you,

Réa McKay

Vice President, Human Resources and Employee Wellness

Reminder to managers: In keeping with Parks Canada's procedures for communications with employees, managers are responsible for ensuring all employees under their responsibility receive the information intended for them. It is important that you find a means to transmit this message and, if any, the attachment(s) to employees without access to Parks Canada e-mail or the intranet, e.g., by posting it, circulating a paper copy or by any other appropriate means.