The federal budget presented Tuesday promises to cut the public service by about 16,000 full-time equivalents over the next three years, or about 4.5 percent of the current workforce. Of these, up to 1,000 will be executive positions.
By 2028-29, the government predicts a reduction of around 40,000 workers compared to 2023-24, when the size of the public service was at its peak.
However, there are other changes in store for federal public servants: many of them live and work in the National Capital Region, where the federal government is the largest employer.
“This is a transformative moment for the public service to review how we work, how we can improve services to Canadians and how we can build for the future,” according to the budget document.
Below are some specific ways the federal public service could be transformed with Budget 2025.
Early retirement
Budget 2025 proposes to amend tax and retirement rules to offer a voluntary early retirement incentive (ERI) program through the Public Service Pension Plan.
Under the proposal, employees up to age 50 with at least 10 years of employment and at least two years of pensionable service would be eligible to apply.
If approved, they could retire with an immediate pension based on years of service, with no penalty for leaving early.
The ERI program would go into effect on January 15, 2026. The program would end within a year, so the window to participate will be narrow.
The federal government predicts the program will cost $1.5 billion over five years, with about half of that spending coming next year. It is expected to save taxpayers about $82 million a year, much of it coming from pension contributions.
Sahir Khan, executive vice-president of the Institute for Fiscal Studies and Democracy at the University of Ottawa, said acceptance could depend on the specifics of what is being offered.
“I think if you were thinking about leaving… then maybe that’s an incentive to leave, if the packages are generous enough,” he said.
Those who prefer to stay will have to be flexible, he said.
“There will have to be a certain fluidity among public servants to go where the resources are and where the demand for their services is.”
There are a lot of numbers. Here are the main conclusions.
Reduce the number of consultants
At the same time, Budget 2025 promises to reduce spending on management and other consultancy services over the next three years, “in order to reduce unnecessary spending and empower the public service to take on more responsibility and accountability”.
In addition to reductions in spending on administration, travel, training and other areas, limiting the use of outside consultants is expected to save $25.2 billion over four years, according to the budget document.
Some departments, including Immigration, Refugees and Citizenship Canada, Innovation, Science and Economic Development Canada and Shared Services Canada, specifically mention reducing their reliance on outside consultants as a way to meet their budget goals.
Public servants hoping to retire early and return as consultants for more lucrative contracts may have to reconsider their plans.
Embracing AI
As the federal government works to reduce its reliance on consultants, it appears poised to double down on artificial intelligence (AI).
The government will establish a Digital Transformation Office to “identify, implement and scale technology solutions”, including accelerating broader adoption of artificial intelligence technology.
As part of that push, Shared Services Canada will partner with leading Canadian AI companies to develop a made-in-Canada AI tool that will be deployed across the federal government.
For example, shared services would use AI to automate IT support requests and reduce call volume, according to the budget document. The Department of Justice would use AI to streamline routine tasks and “free up employees to focus on higher-level strategic work,” and Transport Canada would use AI to enable “a greater focus on self-service and technology-based solutions.”
Collective negotiations
This year marks the beginning of a new round of collective bargaining between public service unions and the federal government.
Budget 2025 promises to negotiate “fair and reasonable agreements” that balance the interests of workers and taxpayers, but also proposes amendments to the law governing those agreements “to ensure the government can attract and retain the talent needed for a high-performing public service that meets the needs of Canadians.”
The budget also notes that public service salaries “should be aligned with Canadian labor market trends and the government’s fiscal position,” which could signal a tightening of finances when it comes to public servant salaries.
