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 through 2027 and rolled Work-Sharing into a new Worker Retention and Retraining Program, so how you complete a Record of Employment and structure a severance payment now directly affects a terminated employee's EI eligibility.
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. The rules around how a termination is documented and how severance is paid now determine how quickly, and how fully, a laid-off employee can access 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 10, 2027 | 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 10, 2027 | 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.
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 disqualifies a claimant from EI for up to 52 weeks. The new measure removes that disqualification when the employee's most recent job loss, the one they are actually claiming EI for, was not their fault. The federal government has not yet published guidance on how "no fault of their own" will be interpreted or administered, so treat this measure as directionally confirmed but still awaiting detail.
What Is the Worker Retention and Retraining Program?
The government merged the existing Work-Sharing Program and the Worker Retention Grant into a single Worker Retention and Retraining Program. It funds up to 1,000 dollars per participant toward training and administrative costs for employers who reduce hours instead of laying staff off, and eligibility was extended to nonprofit and charitable organizations affected by the tariffs. For an employer weighing layoffs against reduced hours, this program is now 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 loan offers up to 5 million dollars, with the Liquidity Support stream carrying interest-only payments for up to 36 months against a 60-month total repayment term. Eligibility was broadened to businesses with as little as 1 million dollars in annual revenue, at least three years in operation, and a positive cash flow history, provided the business shows either at least 15 percent of sales derived from exports to the US, or a tariff-related revenue decrease or cost increase of 10 percent or more. The loan 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's stated intent with this package is that it should not be the default first move.
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.
- Consider structuring termination pay as a lump sum rather than salary continuance, since a lump sum is more compatible with the current EI treatment of separation payments.
- 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 current extended measure, termination and severance pay are excluded from what counts as "earnings" for EI eligibility purposes through October 10, 2027, so employees are not required to exhaust that pay before receiving EI. Structuring the payment as a lump sum, rather than continuing salary over time, is generally more compatible with a clean EI application, though the specific facts of a claim still matter.
Who qualifies for the Worker Retention and Retraining Program?
Employers using reduced hours instead of layoffs, including nonprofit and charitable organizations affected by the tariffs, can access funding of up to 1,000 dollars per participant for training and administrative costs. Confirm 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 federal government has not yet released detailed guidance on how "no fault of their own" will be assessed. 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 announcements and law firm commentary 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
- Siskinds LLP, Alexandra Azzopardi, "Tariffs, Terminations And EI: Implications Of Canada's New Support Package For Employers," via Mondaq, captured September 2, 2026
- Hicks Morley, Mornelle Lee and Henry Y. Dinsdale, "Federal Government Announces Counter-Tariffs and $7.5 Billion Support Package for Canadian Workers and Businesses," August 26, 2026, captured September 2, 2026
- Ogletree Deakins, "Canada Announces $7.5 Billion Support Package for Tariff-Affected Employers," August 27, 2026, captured September 2, 2026
- Business Development Bank of Canada (BDC), "Pivot to Grow Loan," captured September 2, 2026
- GlobeNewswire, "New Tariffs, Tighter Cash Flow: BDC Expands Pivot to Grow," August 25, 2026, captured September 2, 2026