Six stories public servants should watch in 2026

For federal public servants, 2025 was a fairly tumultuous year.

The year saw the end of a government, an early election and the ascent of a new prime minister with a whole set of new priorities. The public service saw its headcount shrink, as the government looked to “rightsize” the bureaucracy after almost a decade of growth.

Several departments have started to transition to Dayforce and away from the plagued Phoenix pay system in 2025. And new rumours surfaced towards the end of the year that a full return to office was looming for public servants.

Next year may not be much less tumultuous as a wave of workforce adjustment notices are expected to hit employees’ inboxes in January.

Here are the stories public servants will want to keep an eye on in 2026.

Public servants to face the brunt of Carney’s public service cuts

Some departments and agencies have already started to send out workforce adjustment letters to hundreds of public servants since Prime Minister Mark Carney’s government announced it plans to shrink the size of the public service by tens of thousands of jobs. Workforce adjustment is a process that ensures, where possible, alternative employment opportunities will be made for workers who lose their position.

More departments have confirmed they will be sending out notices to workers whose positions could be impacted in mid-January.

The impact could be significant with around 30,000 public servants’ jobs are expected to be cut, although it’s still unclear how many of those will be in 2026.

Earlier this month, around 68,000 public servants received letters letting them know they are eligible for the early retirement incentive program. It’s unclear how many public servants the government expects will voluntarily leave through the program.

New agencies, new me

While the overall headcount of the public service is expected to shrink, Carney’s government has created three new agencies to implement some of his policy priorities, and all of them are led by executives from outside of the federal public service.

The Major Projects Office, led by Dawn Farrell, who served previously as the CEO at Trans Mountain Corporation, will lead the governments efforts to fast track major resource projects.

Ana Bailão, a former deputy mayor of Toronto, was tapped to lead Carney’s new Build Canada Homes agency to help incentivize developers to build thousands of homes across the country.

Carney also appointed Doug Guzman, a banker who previously served as the deputy chair of the Royal Bank of Canada, to spearhead the Defence Investment Agency, which will oversee defence procurement.

The Major Project’s Office is looking to employ private sector workers, according to the Privy Council Office (PCO).

In a statement, PCO spokesperson Pierre-Alain Bujold said that the staffing structure at the agency is “flexible and agile” and will be made up of people “from the public and private sectors.”

“The MPO’s objective is to recruit top-level expertise, whether from the public or private sector, in order to help get major projects built at speeds not seen in generations,” Bujold added.

Public service unions will be negotiating new collective agreements

Two of Canada’s largest federal public service unions, Professional Institute of the Public Service of Canada and the Canadian Association of Professional Employees are both set to launch negotiations with the federal government on new collective agreements in 2026.

Collective bargaining is also set to continue for the Public Service Alliance of Canada (PSAC), Canada’s largest federal public service union, in 2026 after negotiations launched with the federal government last year.

PSAC has asked for a 4.75 per cent raise per year for its members.

Other issues PSAC has identified as priorities include remote work, enhanced overtime and how the use of artificial intelligence is set to be expanded in the public service.

Artificial intelligence use to expand

Public servants can expect the list of entries in the government’s newly minted artificial intelligence (AI) register to grow in 2026. The register went live at the end of November, showing more than 400 uses of current or planned AI systems across 42 government institutions.

And that number will increase as the government implements its federal AI strategy, which guides the use of the rapidly developing technology across the public service.

Carney has repeatedly signalled an intention to expand the use of AI, and his government inked a memorandum of understanding in June with Canadian AI firm Cohere to speed up adoption of the technology.

Carney’s first budget pointed to the “integration of technology and artificial intelligence” as a key strategy for boosting productivity and improving services.

But that integration has already drawn concerns around specific uses, such as the government’s AI-powered translation tool GCTranslate, which has some translators concerned about linguistic rights, bias and the loss of nuance in translated texts.

In addition to several recent announcements of targeted investments in AI applications, Budget 2025 includes $2.7 billion over nine years to update the Meteorological Service of Canada’s computer system, with the goal of improving access to reliable weather forecasts.

Could public servant see a full return to office?

At the end of November, public service unions began warning about rumours of a looming full-time return-to-office mandate for public servants.

Then, earlier this month, Carney signalled his government would be engaging with unions on the details of such a policy “over the next several weeks.”

He suggested the plan would likely include “different levels of return, depending on seniority, depending on role, and obviously, depending on capacity.”

Since the rumours began swirling, public servants have expressed concerns about the state of federal office space and the readiness of public transit — though Ottawa Mayor Mark Sutcliffe has said the city is “preparing” should there be an influx of workers downtown.

The Treasury Board has said it has no plans to start collecting data on public service productivity, causing some researchers to argue the government is flying blind when it comes to decision-making on hybrid work.

Buy Canadian

As part of a response to U.S. President Donald Trump’s punishing tariffs, Public Services and Procurement Canada is rolling out a federal ‘Buy Canadian’ policy.

Carney was elected amid a steady stream of threats from the White House and a strong wave of anti-American sentiment at home. Leveraging public spending to support domestic industries was billed as a key part of the government’s response to an increasingly bellicose neighbour.

The first wave of that plan kicked in at the end of 2025.

It gives Canadian companies a leg up when bidding on government contracts worth at least $25 million in a handful of sectors, including defence and infrastructure.

Those bids for government contracts will now be assessed partly on the amount of Canadian goods and services they include.

The policy also brought in a new definition of what counts as a Canadian supplier, requiring companies to employ personnel in Canada and prohibiting them from subcontracting work overseas.

Observers say the new definition remains too vague and omits protections for intellectual property. As well, new rules favouring Canadian bidders only apply to a sliver of government spending.

But the plan is in its infancy.

Through 2026, expect the policy to be fleshed out.

By the spring, the government plans to drop the minimum threshold to qualify for the current ‘Buy Canadian’ rules from $25 million to $5 million. It also expects to be rolling out dedicated support for small- and medium-sized businesses to help them navigate the system.

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