OTTAWA - The federal government has announced plans to reduce the size of the public service by 10 percent over the next three years, which could result in the elimination of up to 40,000 jobs. This decision marks a departure from the government's previous commitment to reduce the workforce solely through attrition. The budget, presented on Tuesday, aims to slow the growth of government spending on operating costs from eight percent to less than one percent. It also seeks to enhance efficiency in government programs, including the increased use of artificial intelligence.

By the end of the 2028-29 fiscal year, the government expects the public service workforce to shrink to approximately 330,000 employees, down from a peak of nearly 368,000 in 2023-24. The plan includes cutting 1,000 executive positions over the next two years. As of March, there were 9,340 executives in the federal public service. Additionally, the government plans to reduce spending on management and consulting services by 20 percent within three years.

Finance Minister François-Philippe Champagne emphasized the need for a more efficient government. "Since 2019, the federal public service population has grown at a rate far greater than the Canadian population," he stated. "We must get the size of our public service back to a sustainable level that is in keeping with best practices."

While some job reductions will occur through attrition, the budget acknowledges that certain positions will be eliminated. Prime Minister Mark Carney had previously committed to "capping, not cutting" the public service during the April election campaign. To encourage early retirements, the government is introducing a voluntary program allowing workers to retire up to five years early without facing pension penalties. This option will be available to employees aged 50 or 55 and older, provided they have at least 10 years of employment and two years of pensionable service. The program is set to begin by January 15, 2026, or once the legislation is approved.

The budget allocates $15 million over two years, starting in 2025-26, to manage the early retirement program. Government organizations will communicate these changes to employees and collective bargaining agents in the coming weeks. The Public Service Alliance, the largest union representing federal workers, has expressed concerns about the impending job cuts. Union president Sharon DeSousa noted that the executive ranks have expanded significantly while the overall public service has seen job losses. "This government's focus should be on investing in the front-line public services people in Canada depend on — not expanding the size of senior management," she stated.

The budget also outlines plans for technological advancements, including the establishment of an Office of Digital Transformation to implement technology solutions across the federal government. Shared Services Canada will collaborate with the Department of National Defence and the Communications Security Establishment to develop a Canadian-made AI tool for government use. This tool aims to streamline workflows and improve service delivery.

Former clerk of the Privy Council Michael Wernick described the budget as a significant shift from years of growth in the public service to a period of downsizing. He noted that public servants are experiencing "maximum uncertainty" regarding their job security. "They got some clarity from the budget, but uncertainty about their particular department, agency, or workplace remains," he said.

As the government prepares for a new round of collective bargaining with public service unions, it has pledged to negotiate fair agreements while ensuring salaries align with market trends and the government's fiscal position. This could indicate a tightening of budgets for public servants' pay in the future.

This report was first published on November 4, 2025.