Budget 2026: Highlights for HR

Finance Minister François-Philippe Champagne has tabled Budget 2026, a plan titled Masters of our destiny that pairs a large investment push with targeted help for low-wage workers, caregivers and apprentices.

For HR leaders, the full budget sets new immigration targets and a reform of the Temporary Foreign Worker Program, replaces the Canada Workers Benefit with a larger benefit that ends advance payments, and backs changes to the Canada Labour Code for federally regulated workplaces.

The government frames the plan as restraint plus investment. It says growth in direct program spending falls from more than 8% a year over the past decade to less than 2%, while nearly $22 billion over five years goes to new affordability measures.

"Canada has the resources, talent and ambition to succeed," Champagne said.

Firmer job market, but thin for new entrants

The budget says private employment rose by 214,000 over the past year, but total employment grew by only 95,000 after losses in August and September. Unemployment was 6.5% in September, helped partly by slower population growth that means fewer people entering the workforce.

The government describes 2025 as a "low-hire, low-fire" year, with firms cutting vacancies rather than staff. Youth unemployment has eased from a 14.6% peak in September 2025 to 13%, but the budget concedes low vacancies still make it hard for young people and other new entrants to find work.

Private-sector economists surveyed by Finance expect unemployment to average 6.6% in 2026 and fall to 5.8% by 2030, while renewed U.S. tariffs are expected to slow hiring in exposed sectors and regions. Real hourly wages are 6.1% above 2019 levels. Energy prices have pushed inflation to around 3%, and the Bank of Canada raised its policy rate to 2.5% on Oct. 28.

Skills and the trades: Team Canada Strong 

The budget projects more than seven million job openings over the next decade and says the skilled trades alone will need more than 1.4 million people by 2033. Its main response is Team Canada Strong, which aims to add up to 100,000 Red Seal tradespeople by 2031.

The pieces most relevant to employers:

• Build Canada Apprenticeship Service: small and medium-sized employers that hire a first-year apprentice in an eligible Red Seal trade could receive up to $10,000.
• Apprentice income supports: a $5,000 completion bonus, with applications opening Nov. 16, 2026, plus a $400 weekly top-up on top of EI during mandatory in-class training.
• Longer EI for apprentices: the minimum EI regular benefit for apprentices in full-time training would rise temporarily from 14 to 18 weeks.
• Youth placements: paid, hands-on trades placements expected to reach 100,000 people over five years.

The apprenticeship service, youth placements and weekly top-up are set to launch early next year.

For employers hit by tariffs, the Workforce Retention and Retraining Program helps keep and retrain staff through disruptions. It is part of a $3.5-billion rapid-response package announced in August, and the budget adds $170 million in 2027-28 for training delivered with provinces.

Ottawa says enhanced EI supports have reached 2.8 million workers and averted an estimated 30,000 layoffs.

The budget also proposes $451.8 million over four years for a new Partnerships for Indigenous Workforce Readiness Fund. It targets up to 90,000 AI-related jobs and work placements for young people over five years, starting with 10,000 Mitacs placements, alongside free AI training through a National AI Literacy Initiative.

And it extends Inclusion Canada's Ready, Willing and Able program, which helps employers hire people with disabilities, to March 2028.

Funded projects for skilled labour

Demand for skilled labour will be pushed further by funded projects in housing, electricity, nuclear and defence. The budget aims to double the nuclear workforce to 180,000 and more than double the defence-sector workforce to 89,000.

Not everyone thinks that goes far enough. The Canadian Construction Association said the budget contained minimal new measures for what it called a significant and persistent workforce shortage, even as it welcomed last month's $430 million, five-year apprenticeship announcement.

It wants federal workforce programs to cover both unionized and open-shop employers and to recognize training pathways beyond the Red Seal program. "The next priority must be ensuring the conditions are in place to turn these commitments into completed projects," said CCA president Rodrigue Gilbert.

Labour struck a similar note. Canada's Building Trades Unions, which represents about 500,000 skilled trades workers, said the government's capital plans depend on having enough tradespeople to deliver them. The focus now, it said, must be on turning Team Canada Strong and earlier commitments into real jobs, with governments, industry and labour working together to put workers where they are needed.

"Our members have the skills and experience to get the job done," said executive director Sean Strickland.

Immigration: holding the line

The 2027-2029 Immigration Levels Plan, included in the budget, sets 370,000 new temporary resident arrivals and 380,000 permanent resident admissions in each of 2027, 2028 and 2029.

Those match the notional 2027 and 2028 levels in last year's plan, so Ottawa is holding the line rather than raising or cutting.

For employers, the bigger news is a one-time transition. Up to 200,000 temporary residents already in Canada could become permanent residents by the end of 2027, including 100,000 workers eligible for Express Entry or a Provincial Nominee Program, delivered with provinces and territories. That could help employers keep work-permit holders they might otherwise lose.

Employer groups welcomed the pathway but want specifics. The Canadian Construction Association said it gives industry more flexibility to respond to labour pressures.

Canadian Manufacturers & Exporters said the measures could help employers retain skilled workers, but that manufacturers need details on how regional and sectoral labour needs will be reflected in their design.

Restaurants Canada, whose members employ about 1.2 million people and are the country's largest source of first-time jobs, welcomed the commitment to align immigration programs with regional labour needs. It said the measures' value will depend on how programs are designed, noting that 67% of operators report lower profitability than a year ago.

"A strong economy needs strong local businesses and access to the workforce required to support growth," said president and CEO Kelly Higginson.

Temporary foreign workers, migrant workers

The budget also proposes $151.5 million over five years to reform the Temporary Foreign Worker Program. The goals are to better align it with regional labour needs, speed up processing and strengthen employer compliance.

The numbers show how much temporary hiring has already fallen. New worker arrivals from January to August 2026 were 57% lower than in the same period of 2024, and new international student arrivals were down 71%. For strategic sectors, the Global Talent Stream now processes Labour Market Impact Assessments in as few as 10 business days.

The budget also renews funding for the Migrant Worker Support Program, which helps temporary foreign workers understand their rights and get help with workplace problems.

More detail on the levels plan will come when the immigration minister tables the 2026 annual report to Parliament.

Employer tax measures

Several business tax changes could affect hiring budgets and compensation design, though none is a payroll tax cut.

• Productivity Mega Deduction: businesses could permanently write off about two-thirds of new capital assets immediately, for assets acquired on or after Sept. 15, 2026, cutting the marginal effective tax rate on new investment from 13% to 6.4%. Finance estimates up to 80,000 jobs within 10 years. More spending on equipment and automation often changes the skills employers need.
• Canada Growth Incentive: a tax exemption on up to $15 million in capital gains on qualifying shares of eligible Canadian-controlled private corporations, including shares issued in exchange for employment services. The budget says this gives early-stage employees more upside from accepting equity. Shares must be held at least 36 months, and the measure covers shares issued from Budget Day until the end of 2036.,
• SR&ED expansion: $930 million over five years to cover certain commercialization costs, such as regulatory approvals and patent protection.
• Canadian Journalism Labour Tax Credit: extended to private audio and audiovisual news outlets at 35% on up to $85,000 per employee, with the 35% rate renewed to Dec. 31, 2028.

Manufacturers, who had long called for permanent immediate expensing, were pleased.

"The Productivity Mega Deduction is a strong win for manufacturers," said Dennis Darby, president and CEO of Canadian Manufacturers & Exporters, adding that "now the government needs to deliver.”

The group also urged Ottawa to get tariff assistance to affected manufacturers quickly, noting that U.S. tariffs continue to weigh on investment and employment.

Small business was far less impressed. The Canadian Federation of Independent Business called the budget "mega disappointing," saying it offers neither tax cuts nor tariff relief, and that firms with less than $1 million in sales still do not qualify for existing tariff support programs.

CFIB president Dan Kelly praised the Canada Growth Incentive's potential but said its sector exclusions would shut out about half the businesses that could otherwise use it, including restaurants, hotels, family farms and engineering firms. CFIB did welcome the Mega Deduction, the enhanced small business rollover and the tax simplification measures.

Each item is a proposal until enacted, and detailed eligibility rules will follow in legislation.

Employment law and labour relations

The most significant labour-law item is Bill C-39, the Building Canada Strong Act, introduced Sept. 21, 2026. Beyond speeding up major project approvals, it would modernize the Canada Labour Code to support earlier bargaining, negotiated settlements and dispute resolution, while the government says the right to strike remains fully protected.

The bill also promises more prevention activity, inspection capacity and enforcement on workplace safety. It would add 26 Canada Industrial Relations Board staff to reduce backlogs of worker complaints, and strengthen enforcement against worker misclassification and wage theft. These changes apply to federally regulated employers, such as banks, telecoms, airlines, railways and ports.

Other items to watch:

• Non-compete clauses: Ottawa will work with provinces and territories toward harmonized restrictions on non-competes in employment contracts, modelled on the federal approach.
• Labour mobility: a new 30-day service standard for credential recognition, and recognition of key construction health and safety training across provinces so workers do not have to repeat it.
• Privacy: Bill C-36 would strengthen privacy protections and transparency around the use of personal information in automated systems, enforced by a new Digital Safety and Data Protection Commission. The budget frames it around consumers; whether it reaches employee data is not stated.
• Pensions and retirement savings: amendments to the Pension Benefits Standards Act, 1985 would make electronic communications easier for federally regulated plans and let certain pooled registered pension plan members set their own contribution rates. Ottawa will also consult on merging RRSP and RRIF rules into an "RRSP for life" that removes the need to convert at age 71, with submissions due Jan. 8, 2027.
• Accessibility: a commitment to work with provinces and partners toward a barrier-free Canada by 2040, including in workplaces.

Payroll and benefits administration

Several changes land directly on payroll teams.

• EI premiums: the 2027 rate has been set at $1.64 per $100 of insurable earnings and is projected at $1.63 for 2028. But the budget's new EI-funded measures add an estimated $3.9 billion in costs over five years, which it says puts upward pressure on the rate.
• CPP: the budget confirms the reduction in the base Canada Pension Plan contribution rate announced in the spring and books $305 million in savings to the federal government as an employer. It does not state the new rate, so confirm it with the Canada Revenue Agency before updating 2027 payroll.
• Information-return penalties: most fixed-dollar penalties, including those for failing to file information returns, would rise to reflect inflation and be indexed every five years. Several would scale with size, at three times the base for medium-sized corporations and eight times for large ones, starting with taxation years ending after 2027.
• Employee tax changes: from the 2027 tax year, the northern residents' travel deduction would no longer depend on employer-provided travel benefits, commission employees could claim travel and other expenses together, and the $1,000 cap on employed artists' expenses would be removed. Employer-funded tuition would no longer block the scholarship exemption, and tradespeople could claim a flat $1,500 labour mobility deduction.

For federal public-sector employers, the budget proposes restoring a combined 2% pension accrual with CPP or QPP. It also reports the public service has shrunk by nearly 10% from its peak, to about 332,000 employees.

The Professional Institute of the Public Service of Canada, which represents more than 80,000 public-sector professionals, warned that the government cannot deliver its ambitions while cutting the experts needed to carry them out. It called for a pause in further reductions until their effects on services and public safety are assessed.

The union also said projected outsourcing spending has reached a record $27.1 billion. The budget, for its part, says Ottawa is cutting spending on external management and consulting services by 20% over three years. The two figures measure different things and have not been reconciled here.

A bigger workers benefit

The Build Canada Workers Benefit replaces and enhances the Canada Workers Benefit, a refundable credit for low-income earners. From the 2027 tax year, the maximum rises to $1,859 for single individuals and $3,143 for families, up from $1,709 and $2,943.

The minimum earnings needed to qualify drop from $3,000 to $500, and from $1,150 to $200 for the disability supplement. Ottawa says about 1.9 million workers would get more, including 180,000 new recipients, and estimates 240,000 people would be lifted out of poverty. The lower threshold matters most for part-time, seasonal and gig workers with very low earnings.

The change employees are most likely to notice is the end of advance payments. Advances would be cut in half for the 2027 tax year, starting July 2027, and eliminated from 2028; workers would instead receive their full entitlement after filing their return. Low-wage staff who rely on those advance cheques may welcome a heads-up from their employer.

Other affordability changes employees may ask about:

• Groceries benefit top-up: a one-time 50% supplement in early 2027, worth up to $339 for a single person and $679 for a couple with two children.
• One tax deadline: May 15 would become the single date for filing returns and paying balances owing, including for the self-employed, from the 2027 tax year.

Caregivers, mental health and child care

The Canada Caregiver Credit becomes fully refundable, worth up to $1,260 a year from 2027 and indexed after that. The budget estimates 585,000 caregivers would receive support, including 180,000 who get no benefit today, and that 15,000 people would be lifted out of poverty.

A refundable credit pays out even when a person owes little or no tax, which tilts support toward lower-income and part-time workers. The budget notes that more than half of Canadian women are caregivers, so the change reaches a large share of most workforces.

"Today is a significant win for caregivers across Canada," said Liv Mendelsohn, CEO of the Canadian Centre for Caregiving Excellence. The group's Caring in Canada 2026 report found caregivers face average financial costs of about $12,000 a year, and that 83% said a refundable credit would help their finances. Those are the advocacy group's figures and have not been independently verified here.

On mental health, the budget provides $1.2 billion in 2027-28 to extend federal agreements with provinces and territories for mental health, addictions, and home and community care until March 31, 2028. That is a one-year extension, so HR teams planning multi-year EAP or wellness strategies should watch whether it is renewed.

Child care, a key factor in parents' workforce participation, gets up to $5.4 billion over two years to keep fees stable while longer-term agreements are negotiated. The budget says participation among mothers aged 25 to 54 with young children reached almost 80% in 2025.