July 29, 2026    |  Sign up + past editions    |    Unsubscribe  

Hi all,

The much-ballyhooed Early Retirement Incentive (ERI) is getting a second act.

It was supposed to be straightforward: Offer voluntary departures to eligible employees over 50 to soften the impact of the spending review. But by the time ERI opened for applications, departments had already started sending notices to workers whose jobs were affected by the cuts.

Wait. ERI, an instrument designed to shrink the workforce, could instead become a tool to reshape it? Is it genius? A blessing in disguise? Dumb luck? Or are some people simply seeing more in it than is really there?

Thousands applied by the July 24 deadline and the government has not set out a limit on how many can leave. The real test isn’t how many people applied. It’s who ultimately leaves, what skills go out the door and whether departments use those departures to rethink how they operate.

Let’s dig in.

Today:

Timing changed everything: ERI arrived too late.
ERI takers: Anyone’s guess.
The ‘second pass’ nobody planned for: A workforce rethink.
ERI approvals: Not so hard to get?
Financial guardrails: Here’s the catch.
Beyond headcount: Does anything really change?

ERI: FROM ATTRITION TOOL TO RESET?

ERI finally took effect on March 26 after months of delay. It was designed to encourage eligible employees over age 50 to leave before departments began rolling out their spending cuts under the workforce adjustment directive (WFA), the rulebook for handling job reductions and layoffs.

The plan was simple: let eligible employees volunteer to leave before departments started making cuts. ERI was a tool to increase attrition and avoid layoffs.

The program was supposed to come first, giving departments the chance to reduce staff with voluntary exits before workforce adjustment kicked in. But delays in passing the budget bill pushed its launch into late March. By then, departments had already moved ahead, issuing thousands of notices to affected and surplus employees and planning their workforces around the cuts.

Applications came in. But there was no immediate surge of pent-up demand after months of waiting for the budget to pass. Instead, they climbed steadily over the following months as employees took stock of the changes around them: spending cuts, job losses, another return-to-office mandate, and a government pressing departments to move faster and deliver more. Those with options outside government weighed them.

Employees aged 50 and older make up core pool of potential ERI applicants

Source: Treasurey Board of Canada Secretariat 

ERI BY THE NUMBERS

ERI was always a wildcard.

The government wants to reduce the public service to about 330,000 full-time positions by 2028-29, down from a peak of 368,000 in March 2024. The Comprehensive Expenditure Review (CER) identified about 16,000 full-time equivalents for reduction as departments work toward $13 billion in annual savings.

Departments are getting there through a mix of workforce adjustment, career transition, ordinary retirements, resignations, attrition and ERI. The only estimate of ERI's potential scale came from the chief actuary, who projected that roughly 17,000 of the 68,000 eligible employees could take the incentive—an estimate Treasury Board has never explained.

So far, only 41 applications were denied — less than half of one per cent of the applications. Here's the latest tally: 

• 10,006 applications have been received
•  6,855 have been confirmed to meet the criteria
• 41 have been denied
• 3,110 are still under review

Deputy ministers have final approval authority. The question now is how many workers will actually leave.

Stay or go? More disruption or exit ramp? Behind every one of those 10,006 applications was a deeply personal decision.

ERI offers something most Canadians will never have: the chance to retire early without a stiff penalty. Years of service matter. Someone with 25 years of pensionable service gets the pension they have earned, but that may still mean living on half of what they’re used to.

Not an easy decision. Could they afford to leave? Would they need another job? Were they ready to walk away from a career they spent decades building? And once they raised their hand, could they change their mind?

For many, the biggest question was why they would stay. More cuts? More upheaval? Bigger demands? A full return to the office? A public service that feels increasingly different from the one they joined?

Those taking ERI must be off payroll by Jan. 20. Plenty of people wanted the option but waited until the last minute to apply rather than look like someone with one foot out the door. That can affect careers, how managers see them and where they land in any restructuring. That’s the problem in a system that often runs on signals. The moment you raise your hand, you can change how the organization sees you.

The ‘second pass’ nobody planned for

Somewhere along the line, people inside government say ERI began to take on a different role beyond trimming government.

Treasury Board began publicly describing ERI not only as an attrition tool, but also as a way to “renew and realign” the workforce so departments can operate more efficiently.

One senior bureaucrat described ERI as a “second pass”: a chance for departments to remove layers and revisit plans after employees they expected to keep put up their hands to leave.

"Everyone made their plan, right? They did their WFA, their CER plan, and ended up with a new org structure based on that. Then along comes ERI, and you've got people putting up their hand who you'd expected to be sticking around... So now you need to look at it all again.”

THE CATCH

That opportunity comes with financial guardrails attached to the savings.

The guardrails are designed to prevent departments from banking all the salary savings if ERI results in more departures than planned.

Departments can count ERI departures toward their workforce reduction targets. But if ERI pushes them beyond those targets, the government claws back part of the additional salary savings by reducing their base budgets.

Exactly how those mechanics work is not clear. Asked to explain how the savings are treated, Finance officials say it’s inappropriate to comment on “ongoing government ... operations related to administrative planning.”

No longer exceptional

The mood around ERI also shifted. When the program was introduced, approvals were expected to be hard to get — exceptional, even. But somewhere along the way, that changed too. Now, one senior official says, it's largely “approve by default.”

Even growing departments, including National Defence and security agencies, are now offering ERI.

People inside government say there was pushback at senior levels — including from PCO Clerk Michael Sabia — against making ERI too difficult to access. They say the thinking was that if someone is eligible and wants to leave, why keep them?

That fits with Sabia’s broader message that the public service needs to work differently: simplify, make decisions faster and focus more on delivery.

But not everyone sees ERI as a strategic reset.

As another senior official put it: “They just want people to go. They don’t care who leaves. The message is if someone wants to go, let them go.”

A message like that can have consequences. Public servants are already questioning whether they are valued and where they fit in the Carney government's agenda, says Dalhousie University professor Lori Turnbull.

Voluntary exits, involuntary restructuring? One senior bureaucrat thinks ERI now has the potential to be “kind of genius” — but says “the art is in the implementation.”

ERI creates a “practical reallocation” exercise at the back end of the spending review. Unlike WFA, the exits are individual decisions about whether to leave, not management decisions about who should go.

ERI alone was never meant to deliver all the reductions, but every voluntary departure changes the equation. Losing people departments expected to keep — especially experienced employees or strong performers — creates vacancies and room to move people, work and money around. The more unexpected departures, the more departments have to rethink their workforce plans.

“People leave, and you don't have to pay their salaries,” he said. “But people may be leaving areas where there's a lot of work still to do, and not leaving areas where there's less work to do. So, you take people from the less busy areas and move them to the areas where people are busy. It effectively forces a reallocation from lower priority to higher priority. It's kind of genius when you think about it.”

Whether departments are actually using ERI this way is another question. Government is a big place, and nobody yet has the data to say for sure.

Union concerns evolve with ERI

ERI has irked unions from the start.

First, they saw ERI as a way to sidestep the workforce adjustment process negotiated in collective agreements. On top of that, the incentive — now expected to cost up to $1.8 billion — is being funded from the pension fund’s surplus, which unions argue employees have a stake in.

Now, the same uncertainty that makes ERI attractive to managers worries unions. And the big complaint is that Treasury Board offers little information about how it is being used.

Without departmental and occupational data, they cannot tell whether departures are replacing planned cuts, adding to them or merely delaying future workforce adjustment decisions

“It helps to know what's happening to these positions,” said one union official. “If someone puts up their hand for ERI, is their position gone? Is it not gone? Will it allow for someone who has been affected through WFA to take that position or not? This is where we're operating somewhat blindfolded.”

BEYOND HEADCOUNT

The employees eligible for ERI built their careers in a public service shaped by a different era — one defined by accountability, oversight, risk management and lots of rules.

The Carney government is pushing for a different operating model — one that simplifies, makes decisions faster and focuses more on delivery.

Carleton University's Robert Shepherd argues cutting jobs and reshaping the workforce are not the same as reforming the public service. He sees little evidence of a long-term reform plan beyond targeted changes aimed at delivering Carney’s agenda.

What’s needed, he says, is deeper change to the wiring and plumbing — how the public service organizes itself and makes decisions to deliver for any government.

“It’s not just about rightsizing,” he said. “It’s fitting the public service to suit the role of government in the 21st century.”

A retirement incentive intended to soften cuts became a workforce lever. Some see a clever reset. Others see a lack of strategy. The bigger question is whether changing who leaves will change how government works.

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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 reported 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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