Approximately 16,000 federal public servants are expected to lose their jobs over the next four years as part of the Liberal government’s spending review.
Analysis included in the government’s budget, released on Tuesday, featured departmental plans to annually save a combined $13 billion by 2028-29. The changes include an overhaul of the federal public service, featuring a 40,000-person reduction in full-time positions over the same time period — nearly half of which would be necessitated by the government’s internal savings measures.
“We are modernizing government operations to deliver better results for Canadians and reduce costs,” reads the budget. “To meet the moment, we must reinvent government to be fit for the 21st century.”
“This means recalibrating activities and fiscal room towards our core mandates — spending less on the day-to-day running of government.”
The federal workforce has steadily risen since the Liberals came to power in 2015, peaking at nearly 369,000 full-time workers in 2023-24, according to the Treasury Board. The government has since pursued staff reductions with the explicit goal of bringing the public service down to 330,000 by the end of the decade, which would be accomplished through a combination of attrition (retirements, unfilled departures, etc.), but also lay-offs.
“Since 2019, the federal public service population has grown at a rate far greater than the Canadian population,” said Finance Minister François-Philippe Champagne after tabling the budget in the House of Commons.
“We must get the size of our public service back to a sustainable level that is in keeping with best-practices [and] we will do so with fairness and compassion.”
Among the 16,000 federal employees set to be laid off, 650 positions will be at the senior level (directors or above), which is equivalent to seven per cent of all government executives.
However, the government is also introducing the Build Canada Exchange program (formally known as Interchange Canada), tasked with integrating 50 private sector leaders into the federal public service.
In anticipation of projected reductions, Ottawa is introducing an early retirement incentive program that will allow employees at least 50-years-old who have more than 10 years of employment to pursue early retirement without penalty. Customarily, public servants who retire before they become eligible have their pensions docked by five per cent for each remaining year they had left.
The program will last for 12 months and is expected to save $1.5 billion over the next five years. It will formally take effect on Jan. 15, 2026 (or whenever the corresponding legislation receives Royal Assent).
Moving forwards, public service pensions will also be indexed to inflation, a measure expected to create $5.8 billion in savings by 2029-30. Currently, a federal employee’s pension is indexed to either inflation or year-over-year wage increases for a select group of government workers, depending on which is greater in a particular year.
Following Tuesday morning’s cabinet meeting, Champagne told reports that he felt “people will be reassured in a way that [the government] has made the right choices.”
“We’re going to do this in a smart and compassionate way, preserving the key services that are dear to Canadians and, at the same time, making sure that we become more efficient,” he said. “Overall, if you ask me, Canadians will feel good tonight.”
Additionally, the government has promised to reduce the public service’s reliance on management and external consultants in this year’s budget. More specifically, consulting expenses are projected to decline by 20 per cent over the next three years, which coincides with the government’s plan to improve productivity within the public service by “fostering AI (artificial intelligence) implementation” and “consolidating the administration of programs.”
Leading this initiative will be a new office for digital transformation, which will be responsible for implementing technologically-based solutions throughout the public service.
Earlier this year, the Parliamentary Budget Officer (PBO) found government spending on federal workers could increase by $7 billion by 2030, if Ottawa did not proceed with its plan to cut costs across the government.
While the PBO uses different metrics to calculate the number of federal workers, the office determined the number of full-time employees would continue to grow without government action.
