Let’s take a look at how the government is trying to move faster with fewer people.
Parallel machinery, faster track. It’s not lost on public servants that a growing share of Carney’s big-ticket priorities are being driven by brand-new agencies outside traditional departments. There’s the new Major Projects Office, Build Canada Homes, the Defence Investment Agency — and whatever form the newly announced Office of Digital Transformation ultimately takes.
“As you look at all the new things they’re doing, it doesn’t involve the public service, said one long-time senior bureaucrat. “Most of the money is bypassing departments. It’s like: 'sure, get things done — but get out of the way.' ”
Less red tape for the rulebook. The government is taking another go at the web of rules that bogs down government. It wants a simpler internal rulebook, freeing time, speeding up approvals, and shifting focus from process to results.
A series of legislative amendments will cut unnecessary reports, outdated laws, and approvals that slow things down. Departments will get more freedom to make decisions at the right level, align rules across government, and operate faster and more efficiently. Full details will land in Budget 2026.
“I’ll go.” The attrition game-changer. The Early Retirement Incentive allows eligible public servants to retire early with no penalty, bridging them into retirement while helping to reduce layoffs.
A year and a half ago, about 31 per cent of federal public servants were 50 or older. That’s the ERI target group for the retirement incentive. Among executives, more than half are over 50. About 650 executive jobs will disappear with expenditure review savings and the government wants to reduce about 1,000 all told over two years.
The big risk: a wave of departures could leave big leadership and experience gaps. And that’s just when management and consulting services are being cut by 20 per cent over three years so more work is done internally, theoretically empowering public servants to take on more responsibility and accountability. That’s the reasoning.
The budget earmarks $1.5 billion for the early-retirement incentive, drawn from the surplus that’s been piling up in the public-service pension plan. No estimates yet on how many people could take it. Packages will start rolling out in January or as soon as the legislation passes. But the window is short: one year.
For context:
Total federal public service: 367,772 employees.
30.8 per cent: age 50+
Executives: 9,155 of them:
~50.4 per cent: age 50+
28 per cent: age 50 to 54
16.2 per cent: age 55 to 59
4.9 per cent: age 60 to 64
1.3 per cent: age 65 plus+
Source: Treasury Board of Canada Secretariat
Here come the outsiders. To offset some of this, the government is rebranding Interchange Canada as the Build Canada Exchange, bringing in 50 private-sector leaders in tech, finance, and science to inject fresh ideas, skills, and outside experience. The program uses flexible salary arrangements to bypass pay caps. signaling that this push is about delivery and execution.
Historically, private-sector executives are a tough fit. They face a steep learning curve: navigating government processes and a culture defined by risk aversion, slow decisions, and high scrutiny.
PENSIONS
Cost, cuts and corrections
Pensions are public servants’ most prized asset and the government’s second-biggest liability after federal debt. They got an unusual amount of attention in this budget, some of it even aimed at reining in costs. (Remember, the PS pension surplus is covering the cost of the early-retirement incentive.)
Inflation indexation for one and all. The government says pension indexation for military, RCMP and public-service pension plans will now be consistent with consumer inflation (CPI). Pensions for DND and the RCMP, as well as disability pensions run by Veterans Affairs, have been indexed to the CPI or wage inflation, whichever is higher. Starting in January 2027, everyone’s will be aligned with CPI. That fix saves a staggering $5.8 billion over four years.
Finally, an alignment for the mysterious missing adjustment. Remember that PBO report about the mystery of the missing pension adjustment we wrote about? To recap: When the CPP and QPP were enhanced in 2019, no one updated the public-service pension plan to reflect those changes. So, for years, both employees and the government have been contributing more than necessary for the same level of pension benefits.
It caught Finance’s attention and the budget fixes it.
The outcome:
- Public servants save up to $1,100 a year in pension contributions with no change to their benefits.
- The government saves $1.1 billion over four years, then $384 million ongoing, from lower employer contributions.
How often does that happen? Public servants save and taxpayers save!
And public-safety workers get their “25 and out.” Frontline public-safety employees — from border officers to firefighters, search-and-rescue teams, and parliamentary protection officers — will soon be able to retire with full pensions after 25 years of service, the long-awaited “25 and out.” Border officers have led the push for this change for years, and the Liberals promised it more than a year ago.
