March 25, 2026    |   Sign up or read past editions here.    |    Unsubscribe  

Hi all, 

ERI is a clever idea that may be stumbling in execution. Timing hasn’t been on the side of the Early Retirement Incentive. It’s been nearly five months since the Carney government unveiled ERI in its first budget, billing it as an engine of its downsizing plan — targeting employees over age 50 to help achieve 16,000 spending-review cuts largely through attrition.

ERI was expected to lead the downsizing. But the program requires amendments to the Public Service Superannuation Act, which means it only becomes real once the budget bill it is part of receives royal assent. That bill is still stalled.

Meanwhile, the machinery of workforce adjustment is charging ahead. Departments have sent public servants more than 25,400 notices warning they could be affected by downsizing. They will translate into the elimination of about 10,000 positions.

And still no ERI. 

It’s not just the delay that is the problem. It’s the sequencing. Departments had hoped ERI would draw a first wave of volunteers, reducing the number of employees declared surplus under workforce adjustment.

But the picture is messier now. ERI has become a wild card, and no one knows how big a role it will play. Whether it pulls thousands of experienced employees out the door at once or arrives too late to prevent younger workers from being cut, it could reshape the age, profile, skills, and institutional knowledge of the public service — what many now call the government’s state capacity.

And don’t forget: another $7.5 billion in cuts is coming, which Treasury Board Secretariat says can largely be handled through attrition.

Let's dig in.

Today:

Number of ERI takers?: Get out the dart board.

A richer exit, but… : There’s a catch.

The longer the delay: The harder ERI will be to use.

The tradeoff: Expertise and morale could drop.

Remember the “quiet crisis?”: Let’s hope today’s ERI fares better.

Boom/bust: The public service never stays one size.

Disruptor-in-chief no more: Alex Benay resigned today.

READY, SET ….
All we need is royal assent

Everyone is waiting on ERI. The Office of the Chief Human Resources Officer has sent departments details — requirements, eligibility criteria, guidance — with messaging at the ready to send to employees. For now, it’s under wraps until the budget bill passes. It is now in the Senate.

Departments have been advised: the ERI criteria will be posted online the moment the bill receives royal assent. Letters will go out to eligible employees by mail or through their portal (My GC Pension). The government is plans to use a new tool for ERI applications through Treasury Board Secretariat’s applications portal once the bill is passed.

More than 68,000 workers over age 50 received letters in December saying they are eligible for the incentive. If even a fraction takes up the offer, ERI could quietly deliver much of the government’s downsizing targets without having to declare thousands of employees surplus or put them through SERLOs, the dreaded competitions where surplus employees must compete for their own jobs.

The government plans to shrink the public service from about 368,000 employees to 330,000 by 2028-29. About 16,000 of those cuts come from spending-review reductions announced in the budget.

Forty-three departments have kicked the workforce adjustment process into gear, sending thousands of notices in several waves to warn employees their jobs could be at risk, the Public Service Alliance of Canada says. The National Capital Region is taking a bigger hit — about two-thirds of all notices landed there, with the biggest numbers in Employment and Social Development Canada; Immigration, Refugees and Citizenship Canada; Global Affairs, Health Canada, Transport Canada; and Public Services and Procurement Canada.

Those notices will result in roughly 10,000 job losses, Treasury Board secretary Bill Matthews recently told MPs.

Who will bite? Uptake of ERI is a big unknown, even for the chief actuary. But 25 per cent of those flagged as potentially eligible could take it, she says, though her estimate has been met with plenty of skepticism. It would mean about 17,000 departures, more than enough to cover the 16,000 positions departments are expected to cut over the next three years. That sounds tidy. Too tidy.

If that scenario were to hold, ERI could do much of the heavy lifting in shrinking the workforce — allowing the Liberals to say they kept their promise to manage reductions through attrition or make good on Mark Carney’s vow to cap, not cut, the public service. But the math only works if those retirements happen in the right places at the right time.

The government’s new RTO mandate, however, could push people out the door as it forces workers back to the office for four days (five days for executives). Much depends on deputy-minister approvals and personal circumstances of employees.

Start the clock. ERI won’t be around for long. Once in force, public servants will have 120 days to apply. Departments decide which departures to approve. Departing employees will have up to 300 days to get off payroll.

Oops, not you! As a territorial aside, Yukon government employees — who for historical reasons belong to the federal Public Service Pension Fund — also got ERI letters, much to the chagrin of their employer, which would like to avoid a stampede of volunteers. The Yukon government has asked TBS to amend the budget legislation to exclude its staff. FYI, OCHRO says departments don’t have to offer ERI; they can make a case to Treasury Board for an exception.

ERI / WFA
The exit gamble

Workforce adjustment is already well underway. After rounds of notices, some departments are beginning to move to the next stage — offering voluntary exits before positions are formally declared surplus.

For some employees, the choice has become a gamble. ERI offers a predictable, fast outcome: an early pension without the usual penalty. But workforce adjustment can offer richer exits with severance, cash-outs and education allowances. This is particularly the case when departments invite volunteers before declaring positions surplus. The catch? You only qualify if your job actually disappears.

Those opportunities depend heavily on management decisions and how many positions departments ultimately cut. Take the sure thing now or hold out for a bigger payout that may never come. Adding to the uncertainty is how ERI will ultimately be used. "It's expected that DMs will use ERI to help minimize layoffs associated with savings targets and to restructure their organizations," one senior official said.

The voluntary program sits outside workforce adjustment, but Treasury Board’s latest conditions for approving ERI sound strikingly similar to, well, the WFA. Deputy ministers must confirm that:

• the organization needs to reduce its workforce;
• services to Canadians will be maintained;
• operational and business needs will continue to be met.

Sounds like ERI departures must align with planned cuts. That’s not the flexible lifeline some had hoped for.

ERI hits a union nerve. ERI has irked unions from the start. PSAC argues it sidesteps WFA measures enshrined in collective agreements. It has filed a grievance asking for the program to be paused and negotiated instead as part of WFA. 

The longer ERI sits in limbo, the harder it may be to use, says one senior financial bureaucrat.

For the government, the timing barely matters. The pension cost is already on the books.

Deputy ministers see things differently. They have the final say on ERI approvals.

If their departments are deep into workforce adjustment and cutting positions, they may not want more experienced employees walking out the door. “I do think additional delays could reduce the likelihood of DM signoff,” the official said. “Departments may not be able to operationally accommodate even more people leaving after layoffs. And 300 days may not be enough time for meaningful knowledge transfer.” 

For employees, that’s one more uncertainty in a complicated ERI calculation.

RETIREMENT WAVE
And a younger workforce to manage

ERI was designed to accelerate attrition. But departments will have to be tactical and selective. Pulling forward thousands of employees in the 50- to 55-plus cohort borrows retirements from the future. It can help departments meet short-term headcount targets, but the trade-off is a younger workforce with significant expertise gaps – and morale problems – to manage over the next decade.

About four per cent of the federal workforce leaves each year, Treasury Board data shows. About 9,000 people retire — two-thirds of all departures. If ERI attracts 17,000 takers, that’s two years of retirements crammed into one. 

But there’s a huge demographic bulge — in mid-career — that makes ERI perfectly timed. More than 40 per cent of employees are between ages 40 and 54. About 18 per cent are already 55 or older — the cohort now targeted by the early retirement incentive.

In other words, ERI taps the front end of a big retirement wave. Lots are close to retirement now, with another surge – the 40 to 54 age group – in the pipeline coming up later.

The “age bulge”:

Mid-career : age 40-54

40-44 → 14.5 per cent

45-49 → 14.3 per cent

50-54 → 12.6 per cent

👉That’s 41 per cent of the workforce moving into the retirement pipeline over the next 10-15 years.

The near-retirement group:

Employees 55+

55-59 → 9.8 per cent

60-64 → 5.7 per cent

65+ → 2.7 per cent

Total: 18 per cent and a key ERI target pool. This is the long‑service crowd, close enough to retirement that the pension waiver is the killer feature to make them go.

With eligibility tied to age and pensionable service, ERI targets those with 20 to 35 years of service — from administrative and technical specialists with know-how to senior analysts, managers and executives with deep program knowledge and internal networks.

Years of service     Share

0–4                         ~22 per cent

5–9                         ~18 per cent

10–14                     ~15 per cent

15–19                     ~14 per cent

20–24                     ~13 per cent

25+                         ~18 per cent

Source: Treasury Board Secretariat

Treasury Board doesn’t publicly cross-tabulate age and years of service, but here’s the general picture:

• Average hiring age is early 30s after university or grad school.
• A full pension with no penalty requires about 30 years of service.
• Retirement eligibility is typically around age 55 to 60.

That means someone retiring at age 58 usually has 25 to 30 years of service. Roughly 18 per cent of public servants are 55 or older, Treasury Board data shows. About one-third of employees have more than 20 years of service. Those groups heavily overlap, which means ERI is aimed at some of the most experienced employees, who will be taking corporate memory with them out the door.

The primest of the prime targets. The government has committed to cutting executives by 12 per cent — more than 1,000 positions. With an average age around 50 and nearly two-thirds over that mark, many fall squarely in ERI territory. 

It’s a plus for operational funds. ERI is funded through the public-service pension plan rather than departmental budgets. For departments, that makes ERI far cheaper than dipping into their operational funds to pay for workforce-adjustment departures, where cash payouts such as severance and the transitional support measure can reach six-figure sums to get employees off payroll.

Funding ERI through the pension plan – sitting with a $44 billion surplus – raises a long-standing flashpoint for unions that could bubble to the surface.

Déjà vu and lessons from 1995. Ottawa’s been here before. During the 1995 program review, which eliminated 55,000 jobs, the government used ERI and buyouts over three years to encourage departures of all ages. ERI proved far more costly and popular than expected. Large numbers of experienced workers left, as did high-potential staff. Middle ranks thinned and hiring freezes meant few replacements came in. Within a few years, it triggered a “quiet crisis,” prompting then-PCO clerk Jocelyne Bourgon to introduce reforms to rejuvenate the public service and its capacity. She talks about in her book. A Public Servant’s Voice.

Today’s ERI may have been designed to avoid a repeat of 1995: it’s targeted, tighter, narrower, and compressed into a single year. But the risks are familiar. Downsizing doesn't always reshape the public service exactly as planned. Unions have warned MPs these cuts could hollow out expertise in areas from food inspection and research to support for veterans services.

Boom and bust. History also suggests something else: the public service tends to grow back. It grew back larger after Jean Chrétien’s 1995 program review and Stephen Harper’s DRAP, his deficit reduction action plan.

The ideal PS size? In the end, the size of the public service is less about workforce tools like ERI or WFA than about political choices.

The size of the workforce ultimately reflects what governments ask it to do, as Treasury Board’s Bill Matthews recently told MPs. The public service may shrink for now. But history suggests it will grow again. The only question is when and where.

Finally, I'll close with ...

Disruption from start to finish. Alex Benay, once known as the government’s disruptor-in-chief, resigned today. Benay was PSPC’s associate deputy minister for enterprise pay coordination who led development of the new HR and pay system meant to replace the troubled Phoenix. He became a highly visible figure with his regular updates to public servants on its progress — and its problems. He became known as disruptor-in-chief when he was hired as chief information officer in 2017. He left for the private sector, boomeranged back — and now makes another disruptive exit. 

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A bit about me. I write The Functionary as part of my work covering and analyzing the federal public service for Policy Options, where I am the Accenture Fellow on the Future of the Public Service. I've been reporting on the public service for more than two decades, covering parliamentary affairs and politics for the Ottawa Citizen and iPolitics. My work has been recognized with a National Newspaper Award and a Canadian Online Publishing Award. 

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