Public Servants Face Major Changes in 2026 Amid Workforce Cuts

Federal public servants in Canada are bracing for significant changes in 2026, following a tumultuous year in 2025 marked by a government overhaul, an early election, and the emergence of Prime Minister Mark Carney, who is prioritizing a leaner public service. With the federal government announcing plans to reduce the size of the public service by tens of thousands of jobs, many employees are poised to receive workforce adjustment notices as early as January.

The workforce adjustment process aims to provide alternative employment opportunities for those affected by job cuts. Reports indicate that approximately 30,000 positions may be eliminated, although the exact number of job losses for 2026 remains uncertain. Recently, around 68,000 public servants were informed they qualify for an early retirement incentive program, yet it remains unclear how many will opt for this opportunity.

Formation of New Agencies Amid Workforce Reductions

As the overall headcount is expected to decrease, the Carney administration has established three new agencies to advance its policy objectives. Notably, the Major Projects Office will be spearheaded by Dawn Farrell, former CEO of Trans Mountain Corporation, focusing on expediting major resource projects. Furthermore, Ana Bailão, a former deputy mayor of Toronto, has been appointed to lead the newly formed Build Canada Homes agency, tasked with incentivizing the construction of thousands of homes nationwide. Lastly, Doug Guzman, previously deputy chair of the Royal Bank of Canada, will direct the Defence Investment Agency, overseeing defence procurement.

The Major Projects Office intends to recruit talent from both the public and private sectors. According to a statement from the Privy Council Office, spokesperson Pierre-Alain Bujold emphasized the agency’s goal of attracting top-level expertise to expedite project completion, aiming for results not seen in generations.

Union negotiations will also play a crucial role in the upcoming year. The Professional Institute of the Public Service of Canada and the Canadian Association of Professional Employees are set to commence discussions with the federal government on new collective agreements in 2026. Additionally, the Public Service Alliance of Canada (PSAC), the largest federal public service union, continues its negotiations, having previously requested a 4.75 percent annual pay increase for its members.

Expanding Use of Artificial Intelligence and Return to Office Plans

Public servants can expect the government’s newly implemented artificial intelligence (AI) register, which currently lists over 400 uses of existing or planned AI systems across 42 institutions, to grow in 2026. The government’s federal AI strategy aims to expand the use of technology in the public service, with Carney indicating a commitment to further integration. A memorandum of understanding signed with Canadian AI firm Cohere in June aims to accelerate this technology’s adoption.

Despite the enthusiasm for AI, concerns have emerged regarding its application, particularly with the AI-powered translation tool GCTranslate, which raises issues related to linguistic rights and biases. The government’s $2.7 billion investment over nine years to enhance the Meteorological Service of Canada’s computer systems aims to improve access to accurate weather forecasts, further showcasing the integration of technology into public service operations.

In addition to these developments, rumours of a potential full-time return-to-office mandate for public servants have surfaced. Prime Minister Carney hinted that discussions with unions regarding this policy will occur in the coming weeks. The proposal is expected to feature varying levels of return based on seniority, role, and organizational capacity. Public servants have voiced concerns about the adequacy of federal office spaces and public transit readiness, although Ottawa Mayor Mark Sutcliffe has assured that preparations are in place for an influx of workers.

As a response to U.S. tariffs, the government is implementing a ‘Buy Canadian’ policy, which aims to bolster domestic industries amid increasing pressures from the United States. This initiative, which began rolling out at the end of 2025, favors Canadian companies in bidding for government contracts worth at least $25 million. Future plans include reducing this threshold to $5 million and providing support for small- and medium-sized businesses navigating the system.

The upcoming year promises to be pivotal for public servants in Canada, who will need to adapt to significant changes in the workforce landscape, evolving technology integration, and new policies aimed at bolstering domestic industries. As these developments unfold, public servants remain focused on securing their positions and advocating for fair treatment within the evolving framework of Canada’s public service.