The federal budget presented on Tuesday plans to reduce the public service workforce by an estimated 16,000 full-time equivalents over the next three years, representing around 4.5% of the current workforce. Among these reductions, up to 1,000 will be executive positions.
By the fiscal year 2028-29, the government anticipates a decrease of approximately 40,000 employees compared to the peak workforce size in 2023-24.
Various changes are anticipated for federal public servants, particularly those residing and working in the National Capital Region, where the federal government serves as the primary employer.
The budget document highlights this period as a pivotal moment for the public service to reassess work methodologies, enhance services for Canadians, and strategize for the future.
Here are some specific ways the federal public service may undergo transformation under Budget 2025:
**Early Retirement:**
Budget 2025 proposes adjustments to superannuation and tax regulations to introduce a voluntary early retirement incentive (ERI) program within the Public Service Pension Plan. Eligible employees, as young as 50 with a minimum of 10 years of service and at least two years of pensionable service, can apply for this program. If accepted, they can retire with an immediate pension based on their years of service without facing penalties for early departure. The ERI program is expected to commence as early as Jan. 15, 2026, with a one-year duration for opting in. The government estimates the program will cost $1.5 billion over five years, with approximately half of the expense incurred next year. It is projected to save taxpayers about $82 million annually, chiefly from reduced pension contributions.
Sahir Khan, executive vice-president of the University of Ottawa’s Institute of Fiscal Studies and Democracy, noted that the program’s success could hinge on the attractiveness of the offerings. He suggested that generous packages might incentivize individuals considering early retirement. Khan also emphasized the need for flexibility among public servants who choose to remain, urging them to adapt to resource demands and service requirements.
**Cutting Back on Consultants:**
Budget 2025 aims to decrease expenditure on management and consulting services over the next three years to curtail wasteful spending and empower the public service with more responsibility and accountability. Alongside reductions in administrative, travel, training expenses, and other areas, limiting the reliance on external consultants is projected to save $25.2 billion over four years. Several departments, including Immigration, Refugees and Citizenship Canada, Innovation, Science and Economic Development Canada, and Shared Services Canada, have specifically outlined reducing their dependency on external consultants to meet budget objectives. Public servants considering early retirement and subsequent consultancy roles for higher pay may need to reconsider their plans.
**Embracing AI:**
As the government strives to reduce consultant dependence, it is poised to amplify its adoption of artificial intelligence (AI). An Office of Digital Transformation will be established to identify, implement, and expand technology solutions, including expediting the integration of AI technologies. Shared Services Canada will collaborate with leading Canadian AI firms to develop a made-in-Canada AI tool for federal government deployment. For instance, AI will be utilized by Shared Services to automate IT support requests and diminish call volumes. The Department of Justice and Transport Canada also plan to leverage AI to streamline operations and enhance service delivery.
**Collective Bargaining:**
This year marks the commencement of a fresh round of collective bargaining between public service unions and the federal government. Budget 2025 pledges to negotiate equitable agreements that consider the interests of workers and taxpayers. However, proposed amendments to the act governing these agreements aim to ensure the government can attract and retain the requisite talent for a high-performing public service that meets Canadian needs. The budget underscores the necessity for public service salaries to align with labor market trends and the government’s fiscal stance, potentially indicating a more stringent approach to public servants’ remuneration.