Budget ushers in 'transformational' era for federal public service

The union soldier budget tabled tues promises to cut down the public serve by an estimated 16,000 full-time equivalents o'er the next three years, or about 4.5 per cent of the current workforce. Of those, up to 1,000 will be executive positions.

By 2028-29, the government is predicting a reduction of about 40,000 workers from 2023-24 when the size of the public was at its peak.

There are other changes in store for federal public servants, however – many of them living and working in the National Capital Region where the federal government is the biggest employer.

"This is a transformational time for the public service to revisit how we work, how we can improve services to Canadians and how we can build for the future," according to the budget document.

Here's a look at some specific ways the federal public service could be transformed under Budget 2025.

Budget 2025 proposes amending superannuation and tax rules to offer a voluntary early retirement incentive (ERI) program through the Public Service Pension Plan.

Under the proposal, employees as young as 50 with at least 10 years of employment and at least two years of pensionable service would be eligible to apply.

If approved, they would be able to retire with an immediate pension based on years of service, with no penalty for leaving early.

The ERI program would go into effect as early as Jan. 15, 2026. The program would conclude within a year, so the window for opting in will be tight.

The federal government is predicting the program will cost $1.5 billion over five years, with about half of that expense coming next year. It’s expected to save taxpayers about $82 million annually, largely from pension contributions.

Sahir Khan, executive vice-president of the University of Ottawa’s Institute of Fiscal Studies and Democracy, said the uptake could depend on the specifics of what’s being offered.

“I think if you were thinking of leaving … then maybe that’s an incentive to go, if the packages are generous enough,” he said.

Those who’d prefer to stay are going to have to be flexible, he said.

“There’s going to have to be some fluidity among public servants to go where the resources are, and where the demand is for their services.”

At the same time, Budget 2025 vows to reduce spending on management and other consulting services over the next three years, "in order to reduce wasteful spending and empower the public service to take on more responsibility and accountability."

Alongside reductions in spending on administration, travel, training and other areas, limiting the use of external 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 external consultants as a way of meeting their budget targets.

Public servants who are hoping to retire early and return as consultants for more lucrative contracts may have to reconsider their plans.

As the federal government strives to reduce its reliance on consultants, it appears to be ready to double down on artificial intelligence (AI).

The government will establish an Office of Digital Transformation to "identify, implement and scale technology solutions," including hastening the wider adoption of AI 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 volumes, according to the budget document. The Department of Justice would use AI to streamline routine tasks and "free employees to focus on higher-level strategic work," and Transport Canada would use AI to allow "a greater focus on self-service and technology-enabled solutions."

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 it also proposes amendments to the act governing those agreements "to ensure the government can attract and retain the necessary talent for a

high-performing public service to meet the needs of Canadians."

The budget also notes that public service salaries "must align with Canadian labour market trends and the government's fiscal position," potentially signalling a tightening of the purse strings when it comes to public servants’ pay.

Writer and editor

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