Canada's new tariff support package changes how employers should time and structure terminations. On August 25, 2026, the federal government extended key Employment Insurance measures into 2027 and announced a new Worker Retention and Retraining Program that will combine Work-Sharing with the Worker Retention Grant. Because when, and for how long, a terminated employee can receive EI has changed, completing the Record of Employment accurately matters more than ever.
Why Does This Support Package Matter to Employers, Not Just Employees?
The federal government announced the package on August 25, 2026, ahead of retaliatory Canadian tariffs on 27.6 billion dollars of US goods that took effect September 8, 2026. The headline number reported in the press, 3.5 billion dollars, is the Rapid Response Supports for Workers and Employers stream specifically. It sits inside a larger 7.5 billion dollar package that also includes a 1.5 billion dollar Regional Tariff Response Initiative for small and mid-sized businesses, a 500 million dollar Business Development Bank liquidity stream, and a 2 billion dollar Canada Strong Diversification Fund.
For employers, the part that changes day-to-day HR practice is the Employment Insurance piece. These measures affect when, and for how long, a laid-off employee can receive EI.
What Changed for Employment Insurance Eligibility?
Three temporary EI measures, first introduced in 2025 and already extended once in March 2026 to October 10, 2026, were extended again on August 25, 2026.
| EI measure | Prior end date | New end date | What it means for a terminated employee |
|---|---|---|---|
| One-week waiting period waived | October 10, 2026 | October 2027 (extended by one year) | EI benefits can start from the first week of a claim instead of after an unpaid waiting week |
| Termination and severance pay excluded from EI earnings | October 10, 2026 | October 2027 (extended by one year) | An employee can receive EI without first exhausting their severance or termination pay |
| 20 extra weeks of regular benefits for long-tenured workers | October 10, 2026 | Into June 2027 | Employees with a long work history get extended income support while job searching |
The first two measures were extended by a further year. The long-tenured-worker measure was extended by eight months from its October 10, 2026 expiry, carrying it into June 2027, not the full year given to the other two. For reference, when the measures were extended in March 2026, Employment and Social Development Canada (ESDC) estimated the additional EI claims expected to benefit at 632,000 for the waiting-period waiver, 136,000 for the separation-pay measure and 43,500 for the long-tenured-worker measure (chart below).
Is There a New EI Measure for Employees Who Left a Previous Job Voluntarily?
Yes. The package also introduced a new, one-year measure for employees who voluntarily left an earlier job and later lost a subsequent job through no fault of their own. Under the normal rule, voluntarily leaving a job without just cause can disqualify a claimant from EI. The new measure allows workers to access EI when their most recent job loss was through no fault of their own. The August 25, 2026 announcement did not set out a start date or detailed criteria, so treat this measure as confirmed in principle but still awaiting detail.
What Is the Worker Retention and Retraining Program?
The government announced a Worker Retention and Retraining Program that combines the existing EI Work-Sharing program and the Worker Retention Grant into a single program. Employers who reduce hours instead of laying staff off can receive additional funding of up to 1,000 dollars per participant toward training and administrative costs. The August 25 announcement did not specify a start date. Separately, the March 2026 extension of the Work-Sharing special measures made nonprofit and charitable organizations whose revenue fell directly or indirectly because of the tariffs eligible for Work-Sharing. For an employer weighing layoffs against reduced hours, this program will be the more direct route to funding support for the reduced-hours option.
What Alternatives to Workforce Reduction Does the Package Offer?
The government's broader strategy is to expand financing so employers have a real alternative to layoffs, not just income support after a layoff has already happened. The two financing programs employers should look at directly are BDC's Pivot to Grow loan and the Canada Strong Diversification Fund.
BDC's Pivot to Grow program lends up to 5 million dollars per stream. The Liquidity Support stream added on August 25, 2026 offers loans of 250,000 to 5 million dollars, with 0 percent interest for the first 12 months, interest-only payments for up to 36 months and up to 96 months to repay. The minimum annual revenue requirement was lowered to 1 million dollars. General eligibility requires a Canadian-based business with at least 1 million dollars in annual revenue, at least three years in business, a historically positive cash flow and at least 15 percent of sales from exports to the US; the liquidity loan also requires tariffs equal to at least 5 percent of the company's revenue. The program is available until March 31, 2028.
Combined with the Worker Retention and Retraining Program described above, an employer facing reduced demand has three real levers before termination becomes the only option: bridge financing through BDC or the Diversification Fund, reduced hours funded in part through the WRRP, or some combination of both. Termination remains the right call in many cases, but the government describes the package as helping employers keep their workforce through a difficult period.
What Should Employers Do When Structuring a Termination Right Now?
- Complete the Record of Employment accurately. An incorrect ROE can delay or block an employee's EI claim regardless of what the underlying package allows.
- Because the way termination pay is structured (lump sum or salary continuance) can affect the employment end date and when the ROE is issued, check Service Canada guidance before deciding on the payment structure.
- Tell terminated employees which supports may be available to them, without guaranteeing eligibility, since Service Canada makes the actual determination.
- Before deciding on layoffs, check whether the Worker Retention and Retraining Program or a Business Development Bank liquidity loan makes reduced hours a viable alternative.
- Watch for federal guidance on the new voluntary-departure measure before relying on it in any specific case.
FAQ
Does this change how much severance I owe a terminated employee?
No. The support package changes Employment Insurance eligibility and timing, not an employer's statutory or common law severance obligations under the Canada Labour Code or provincial employment standards legislation. Those obligations are unchanged.
Does a lump-sum severance payment actually help an employee's EI claim?
Under the extended temporary measure, for EI claims starting through October 2027, separation payments such as severance, notice pay and vacation pay are not deducted from EI benefits, so employees are not required to exhaust that pay before receiving EI. Paying through salary continuance can change how long the employment relationship continues, so confirm the specific case against Service Canada rules.
Who qualifies for the Worker Retention and Retraining Program?
Employers using reduced hours instead of layoffs can access additional funding of up to 1,000 dollars per participant for training and administrative costs. Nonprofit and charitable organizations whose revenue fell because of the tariffs are eligible under the Work-Sharing special measures. Confirm the program start date and current eligibility criteria with Service Canada before applying.
Is the new rule for employees who voluntarily left a previous job already in effect?
The measure has been announced and is described as a one-year measure, but the August 25, 2026 announcement did not set out a start date or detailed criteria. Treat it as confirmed in principle, with implementation detail still pending.
Where can an employer get help applying these changes to a specific termination?
Given how much of this turns on documentation, in particular the Record of Employment, and timing, getting a verified read before finalizing a termination reduces the risk of an avoidable delay to a former employee's EI claim.
Not sure how these EI changes apply to a termination you are planning? OptiMaxWork AI runs a 7-stage verification against official sources and current law, and won't guess. Ask your question.
Disclaimer: This article summarizes publicly available federal government and BDC announcements for general informational purposes and is not legal advice. Employment Insurance eligibility is determined by Service Canada on the facts of each claim; verify current requirements with Service Canada or a licensed Canadian employment lawyer before acting. Sources and capture dates:
- Government of Canada, Department of Finance, "Canada Announces Targeted Countermeasures and Substantive Support for Workers and Businesses in Response to U.S. Tariffs," August 25, 2026, captured September 2, 2026
- Government of Canada, Employment and Social Development Canada, "Government of Canada extending Employment Insurance temporary measures to ensure critical income support continues for workers impacted by tariffs," March 20, 2026, captured September 2, 2026
- Government of Canada, Department of Finance, "Support for Canadian workers and businesses affected by U.S. tariffs" (Backgrounder), August 25, 2026, captured September 2, 2026
- Government of Canada, Employment and Social Development Canada, "Government of Canada extends Work-Sharing temporary flexibilities to help employers and workers avoid mass layoffs," March 11, 2026, captured September 2, 2026
- Business Development Bank of Canada (BDC), "Pivot to Grow Loan," captured September 2, 2026
- Business Development Bank of Canada (BDC), "New Tariffs, Tighter Cash Flow: BDC Expands Pivot to Grow" (news release), August 25, 2026, captured September 2, 2026