Summary: While there have been improvements in the market, labour shortages remain a reality for Canadian businesses. With rising vacancies and skills gaps, they struggle to find experienced workers — and without workers, stability and long-term growth suffers. In this article, we explore how workforce strategies can offset shortages and help companies with retention and developing in-house skills.
A strong business starts with a strong workforce. However, global labour shortages are rising, and Canada has not escaped them. But by examining their workforce strategies, forward-looking Canadian businesses can attract new employees and retain existing ones, as well as grow their own skills in-house.
The Canadian Workforce Environment: What to Know
Across the broader Canadian labour market, there are some encouraging signs, with job vacancy rates shifting from 3.7% in January 2024 to 2.7% as of September 2025. However, the Canadian Federation of Independent Businesses tells us that 43% of smaller businesses still see worker shortages as a major barrier. This has been a consistent trend since July 2020, and is still above the historical average.
They highlight some worrying details:
- 69% of small to mid-sized businesses saw a shortage of qualified candidates, across sectors.
- Rising compensation expectations can stifle smaller entities’ access to the labour they need.
- Skills mismatches with job requirements are compounding labour shortages.
- 54% were struggling to attract any candidates at all.
Many Canadian businesses face a lack of applicants, but finding qualified ones can be even tougher, with skills mismatches and attraction difficulties persisting.
Understanding Labour Shortage Drivers
There are several structural factors that drive these labour market pressures:
An Aging Workforce
Almost one-fifth of the Canadian population are older than 65, and retirements typically outpace workforce entry. An aging workforce increases labour pressures, while accelerated retirement timelines and the pandemic’s loss of life further aggravate this trend.
Skills Mismatches
The skills mismatches identified earlier particularly impacts sectors such as manufacturing and construction, healthcare, and even transport and digital occupations. Employers face candidates that lack the technical training or certifications needed to be job ready, slowing hiring and increasing costs.
This is partly compounded by a general disincentivisation of jobs seen as “trade skills,” producing candidates who may have formal knowledge, but lack the experience to translate them into the work environment.
Competition Favours Deeper Pockets
Smaller and rural businesses typically bear the brunt of labour shortages. When talent is scarce, limited recruiting resources and access to skills hold them back. This creates uneven and unequal competition for available workers.
It’s not an easy environment. However, when you understand what drives workforce constraints, you can look to long-term strategies, rather than short-term cycles for your own success.
How Canadian Businesses Can Use Data-Backed Workforce Strategies
Understanding exactly where your business fits into the local labour market is essential to successful workforce planning. National statistics are helpful, but only show the bigger picture.
Fortunately, this data is publicly available. For example, in Ontario, the Ontario Ministry of Labour, Immigration, Training, and Skills Development publishes annual outlooks with information on in-demand trades and regional shortages, as well as local wage trends. Armed with this information, you can properly compare your business to other local operations, and adapt accordingly by:
- Mapping out your current (and anticipated) skills gaps
- Comparing turnover and retention patterns
- Keeping wages competitive to appeal to the workers you need
- Identifying where automation or process redesign could reduce pressures
This sort of foundational analysis helps ensure your workforce strategy is properly anchored in real labour market conditions.
Strengthen Employee Retention First
One in five Canadian businesses spend more than C$100,000 annually on employee turnover. The average sits at C$29,000. As younger generations “job-hop” to find the working conditions they desire, most HR managers expect this to increase.
Yet employee retention is almost always more cost-effective than repeatedly hiring. To improve employee retention, you should:
- Ensure compensation is competitive, and in line with local averages.
- Offer clear internal advancement opportunities and support with training.
- Consider, where possible by the industrial sector, flexible work arrangements, as these are consistently more attractive to younger workers.
- Offer clear benefit options and compensation transparency.
- Ensure poor supervisory behaviour isn’t chasing off the skilled staff you need — as the saying goes, “people leave managers, not companies.”
When you prioritize employee retention, you not only stabilize your workforce, but also maintain niche in-house knowledge and strong skillsets.
Review Compensation and Incentives
There will inevitably be a wage gap between enterprise-level businesses and small to mid-sized companies, and unfortunately, this can impact how attractive they are to new workers. However, keeping compensation in line with local averages for your size is essential. Additionally, note that younger generations want transparency when talking about compensation. Companies that are honest and upfront are more appealing to them.
While not the only solution to persistent vacancies, competitive compensation is often the most direct one.
Seek Training and Upskilling Support Through Governmental Programs
At both the federal and provincial level, there are incentives for employer-led training. These programs not only mitigate skill shortages, but also support employee retention further by offering clear job progression and opportunities for growth. These offerings vary by province, but using Ontario as an example, here are some to explore:
- The Canada-Ontario Job Grant: This federal-provincial program offers cost-sharing support for employer-sponsored training.
- The Apprenticeship Training Tax Credit: Employers can claim back 10%, up to C$2,000 a year, for training apprentices in eligible trades, something particularly appealing for construction, manufacturing, and other industrial trades.
- The Sectoral Workforce Solutions Program: A contribution program that supports workers and employers.
You can use similar support to build your company’s internal capabilities, and reduce reliance on the tight external labour market entirely.
Explore Automation and Technology
Labour shortages can make a good business case for automation and technology, especially in repetitive, predictable roles. However, be aware that this is not a total cure for worker shortages. Ironically, there is a growing shortage of many newer technology skills globally.
When well-planned, a phased rollout of automation can help lighten the load on existing workers, which, in turn, mitigates burnout and reduces turnover.
Strengthen Culture and Employee Experience
While compensation and benefits, as well as the opportunity to gain skills and progress careers, will always be core to both attracting and retaining workers, they’re not the only factors. The experience they have on the job matters too. And that starts with your workplace culture.
Today’s workers increasingly want workplaces that offer:
- Safe working environments
- Supportive leadership and fair treatment
- Inclusion and fair practices
- Clear skills development opportunities
With a strong organisational culture, you not only attract new staff more easily, but also have higher retention rates among existing staff.
Final Thoughts: Building Labour Market Resilience Through Workforce Strategies
Labour shortages may be a reality for many Canadian industries and smaller employers, but they don’t have to hold you back. By focusing on employee retention and creating your own skilled workforce, your business can mitigate these challenges. In turn, this workforce stability lets you grow and compete for talent.
Aprio supports small and mid-sized Canadian businesses through our advisory services, helping you scale and compete with the right financial and business strategies. Connect with our team and gain support in your labour planning.