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Federal Budget 2025: Key Highlights for Employers and Pension Plan Administrators

· 6 min read By: Natasha D. Monkman, David Gruber, Andrew Easto, Paul E. Broad, Owais Hashmi

FTR Now

Federal Budget 2025: Key Highlights for Employers and Pension Plan Administrators

Date: November 5, 2025

On November 04, 2025, the federal government tabled its 2025 budget, “Canada Strong“ (budget).

While focused on economic spending, infrastructure, and housing, the budget also introduced several significant initiatives impacting employers, pension plan administrators, and human resources professionals.

We have summarized the most significant of these announcements below.

Labour and Employment

  • Restricting Non-Compete Agreements: The government announced its intention to amend the Canada Labour Code to restrict the use of non-compete agreements in employment contracts for federally regulated businesses. The government plans to launch consultations on proposed legislative changes in early 2026.
  • Heightened Enforcement Against Worker Misclassification: The budget proposes new measures to crack down on employers that deliberately misclassify employees as independent contractors. The announcement emphasizes the payroll tax implications of misclassification, including the failure to withhold and remit the proper amounts of income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums, as well as the loss of labour law protections and benefits and pensions available to employees. The proposed measures include:
    • New CRA Program: providing increased funding beginning in 2026-2027 to the Canada Revenue Agency (CRA) to implement a program addressing non-compliance related to personal services businesses as well as lifting the moratorium on reporting fees for services in the trucking industry, a sector where misclassification is said to be common
    • Inter-Agency Data Sharing: amending the Income Tax Act and Excise Tax Act to allow the CRA to share information with Employment and Social Development Canada (ESDC) for the purpose of addressing worker misclassification
  • Increased Penalties for Wage Theft: The budget reaffirms the government’s commitment from the 2024 Fall Economic Statement to “substantially increase the penalties” for federally regulated employers who commit wage theft (i.e., fail to pay compensation owed to an employee). Consultations with workers and employers on proposed changes is expected to take place over the coming months.
  • Public Sector Collective Bargaining: The budget proposes to amend the Federal Public Sector Labour Relations Act to adjust the collective bargaining dispute resolution framework although details of the proposed amendments were not set out.
  • Amendments to the Canadian Human Rights Act (CHRA): The budget proposes to amend the CHRA to implement an “organizational realignment” and “streamlined structure” at the Canadian Human Rights Commission, which includes consolidating the roles of the Chief Commissioner and Deputy Chief Commissioner. Further details on the full scope of the amendments were not set out.

Employment Insurance (EI)

  • Extending EI Parental Benefits During Bereavement: The budget proposes amendments to the Employment Insurance Act to allow claimants receiving EI parental benefits to access an additional eight weeks of parental benefits in the event of the death of the child. This change would align with the new leave related to pregnancy loss under the Canada Labour Code, which is expected to be implemented later this year.
  • Support for Tariff-Impacted Workers: For industries affected by trade disruptions (e.g., auto, steel, forestry and agriculture), the budget announces a new re-skilling package.

Retirement Savings Plans

  • Simplifying Qualified Investment Rules for Registered Plans: The budget proposes a significant overhaul of the qualified investment rules for registered plans, including Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), and Tax-Free Savings Accounts (TFSAs). This includes simplifying and streamlining the qualified investment rules for investments in small businesses, repealing the current “registered investment regime”, and replacing it with new categories of qualified investment trusts that would not involve registration effective January 1, 2027. The qualified investment rules for six types of registered plans (excluding Deferred Profit Sharing Plans (DPSPs)) would also be consolidated into a single definition in the Income Tax Act, and the list of qualified investments prescribed in the Income Tax Regulations would be updated and reorganised by asset class.
  • Venture and Growth Capital Catalyst Initiative: The budget proposes $1 billion on a cash basis over three years, starting in 2026-2027, for the Business Development Bank of Canada to launch this new initiative. It will operate as a “fund-of-funds” designed to leverage private venture capital by “incentivising pension funds and other institutional investor participation”, and support new and emerging fund managers.

Public Service

The budget also announced a number of measures focusing on the federal public service, including:

  • Early Retirement: The budget would create a voluntary early retirement incentive program under the federal Public Service Pension Plan to manage proposed reductions in the public service.

The budget would also extend the existing operational service early retirement program to additional specific frontline employee groups. This special benefit would allow firefighters, border services officers, parliamentary protection officers, and others to retire earlier with an immediate unreduced pension after completing 25 years of actual operational service, or at age 50 with 25 years of combined actual and deemed operational service (with at least 10 years of actual service).

  • Public Sector Retirement Benefit Consultation: The budget announces the government’s intention to initiate consultations regarding federal public sector pension benefits. The announcement suggests that recent enhancements to the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) have “led federal employees and the government to contribute more than needed to maintain existing pension benefits.” The government says the initiative will ensure federal employees continue to receive the same pension benefits without overcontributing. This is expected to save federal employees up to $1,100 in annual pension contributions.

Office of the Superintendent of Financial Institutions (OSFI)

  • Expanded OSFI Powers and Authorities: The budget proposes legislative amendments to the Bank Act, Insurance Companies Act, and Trust and Loan Companies Act to enhance the OSFI’s authorities to address integrity and security risks within federally regulated financial institutions. The government also proposes to amend the Office of the Superintendent of Financial Institutions Act to expand the superintendent’s ability to receive and share information with other federal government agencies and bodies.

Other Notable Measures

  • Union Training and Innovation Program: The budget proposes $75 million over three years to expand the Union Training and Innovation Program, supporting union-based apprenticeship training in Red Seal trades.
  • Youth Employment: The budget proposes funding for 2026-27 to support approximately 100,000 summer jobs via Canada Summer Jobs and 55,000 work-integrated learning opportunities via the Student Work Placement Program.
  • Improved Foreign Credential Recognition: The budget proposes $97 million over five years to create a Foreign Credential Recognition Action Fund focused on health and construction sectors to address labour shortages of doctors, nurses, and other healthcare professionals.
  • Reduced Immigration Levels: The budget sets targets to significantly reduce the number of new temporary residents (which includes temporary foreign workers and international students), cutting the total from 673,650 in 2025 to 385,000 in 2026, and then further lowering it to 370,000 for both 2027 and 2028.
  • Real-time Employer Reported Payroll Pilot: The budget proposes funding for a two-year pilot project to be run by ESDC. The pilot will assess whether EI eligibility and entitlement can be determined accurately and securely using real-time employer-reported payroll information.

We are awaiting the release of the corresponding Budget Bill and will provide a more detailed overview of the key employment, labour, pension and benefits-related initiatives in both the budget and Budget Bill once it is released.

Should you have any questions about the budget, please contact your Hicks Morley lawyer.

The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hicks Morley Hamilton Stewart Storie LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hicks Morley Hamilton Stewart Storie LLP. ©