The decision to downsize can be unexpected and tough for employers and employees alike. What are the most common reasons for layoffs, and how are employees supported in the aftermath? Capterra surveyed 1,000+ employees of small to midsize enterprises (SMEs) to find out more about employee exit processes.

SME employee study of the processes and reasons for layoffs in Canada in 2023

While it’s known that the tech industry carried out a wave of layoffs earlier this year, the factors that led to these cutbacks may be affecting other industries as well. Due to the inflation of prices, changing consumer habits, supply chain issues and other business disruptions, many companies have had to downsize to stay on target.

Letting employees go is always a sensitive matter. While human resource (HR) tools may help certain aspects of offboarding and communication around layoffs, terminating employees can have knock-on effects to employee morale and productivity, company reputation and culture, and could even bring legal consequences if done incorrectly.

To get a better understanding of the number of dismissals, the reasons for layoffs, and the way they’re carried out, Capterra surveyed more than 1,000 part- or full-time employees who’ve been working in the same company for the last year (for a full methodology, scroll to the end of this article). 

Almost one third of employees have seen layoffs at their job in past year

Job loss has occurred on and off throughout recent years, starting with a steep drop in the number of employed Canadians in March 2020 due to the global pandemic. Although the labour market has made some gains since then, the most recent wave of layoffs in May 2023 caused unemployment to rise for the first time in nine months. 

From the employees’ perspective, nearly a third (31%) of our survey-takers have seen layoffs in their company in the last 12 months. 61% reported no recent layoffs in the past year, while 9% weren’t sure whether they had occurred or not, perhaps due to a lack of visibility into organization-wide operations.

layoffs becoming common canada 2023

All regions may not be equal when it comes to layoffs, however. A regional breakdown of employees who saw layoffs in their company within the last 12 months reveals the following differences:

  • Quebec: 36% reported layoffs
  • British Columbia: 32%
  • Ontario: 30%
  • Atlantic Canada (Newfoundland and Labrador, New Brunswick, Nova Scotia, and Prince Edward Island): 27%
  • The Prairies (Alberta, Saskatchewan, and Manitoba): 24%

Results from Northern Canada have not been included due to an insufficient number of respondents.

Considering that layoffs were most reported by respondents working in the construction and technology industries, regional layoffs may be occurring most where these industries rule: Ontario, Quebec, and B.C. are home to Canada’s highest investments in residential construction, and all three regions host sizable technology hubs, as well. 

With nearly one in three employees reporting layoffs in their company this year, some may be beginning to worry about job security. But, are layoffs in Canada increasing? 41% of those who’ve seen layoffs happen in their company over the last year say the layoff rate has increased compared to the previous 12 months, while 29% say the rate of layoffs has remained steady since the year prior. These figures suggest the trend of layoffs will continue in these workplaces, whether it’s with a steady or quickening pace.

rate of layoffs in Canada: are they increasing?

According to employees in companies where layoffs are increasing, almost a quarter (24%) say they’ve gone up by less than 10% year over year. Over half (51%) say the increase is between 10% and 20%, while 14% say their company has increased layoffs at a rate of 21% to 30%. 

Tip for HR leaders: Laying off employees is a delicate process for many reasons, one being the possibility of legal ramifications if done incorrectly. Group termination, or mass layoffs, have special requirements on both the federal and provincial levels, where unions and employees must be given advance notice and, in some cases, severance pay. To protect your organization from legal trouble, research the rules in the province where your business operates and use contract management software to keep an eye on the status and agreements within your employees’ contracts.

Most cited reason for layoffs is cost-cutting

As employee terminations have continued over the last few years, the question on many Canadian minds is: why? Based on our survey, the most common reasons for layoffs in Canada include:

  • To cut costs
  • Slowing down of operations
  • Decrease in available funds
  • Outsourcing
  • Mergers
reasons for layoffs in Canada in SMEs

Interestingly, 10% of respondents weren’t informed about the reasons for layoffs. Communications around layoffs are highly instrumental in keeping staff feeling secure in their jobs and maintaining trust in the workplace. Despite this, 37% of employees say layoffs aren’t usually communicated in any company-wide manner, let alone the reasons that drove employers to make them. 

On the flip side, 45% of employees say their company is transparent about layoffs, which can be done in a few different ways. Most employees (55%) who are informed say their managers tell them about layoffs directly in personal reports. The second most common method for informing employees is via mass emails (23%), followed by company-wide announcements (16%).

Tip for HR leaders and managers: When employees aren’t informed about layoffs, stress and worry may start to creep in, which can cause a loss of sleep, concentration, and ultimately, productivity. To keep your staff feeling secure, make sure to keep them in the loop with internal communications that can’t be missed.

Nearly 1 in 3 SMEs doesn’t offer any support after employee dismissals

Providing support after layoffs isn’t even always a requirement, depending on certain factors such as length of employment and provincial regulations. Although the majority of employees (37%) said their company does offer support to laid-off employees, 30% also said their company doesn’t provide anything after a layoff. 33% also said they weren’t sure, leaving the jury split nearly in thirds on the topic of post-layoff support.

support after layoffs in canada 2023

When the question of post-layoff support arises, many think of severance packages. However, that isn’t the only, nor most common, way to offer support when an employee is dismissed. According to employee respondents whose companies offer support after layoffs, the types of support include:

  • A reference letter (reported by 62%)
  • Help finding a new job (41%)
  • A redundancy package (37%)
  • Subscriptions for professional development courses (11%)

Some of the employees who mentioned other forms of support stated their company helps laid-off employees receive Employment Insurance (EI) from the federal government. As registering for EI requires detailed information about an employee’s work experience, some of the paperwork is the responsibility of the employer, such as the Record of Employment (ROE). Stay up to date on provincial and federal requirements for employee aid, as this can help you avoid fines as well as keep relationships in good standing. 

Tip for HR leaders: In some cases, certain forms of support are owed to employees and must be provided within a specified timeframe after their departure. To keep these processes easy and quick to complete, use HR analytic tools that aggregate and safeguard employee data over the course of their employment

45% of SMEs don’t have an offboarding process in place

The offboarding process, or the organized list of necessary actions for an employee’s departure, can help streamline and wrap up layoffs so that businesses can return their focus to moving forward. Despite the benefits of having a defined plan in place for leaving employees, only around a quarter of employees (26%) say their employer has an offboarding strategy. Nearly half of respondents (45%) say no strategy has been implemented, while the remaining survey-takers don’t know if one is in place.

Examples of steps in an offboarding process include preparing paperwork to dismiss an employee, transferring knowledge and responsibilities, deactivating their accounts and access, and organizing exit interviews. With an employee’s tenure wrapped up properly, teams can gain valuable insights, continue working towards their goals, and avoid encountering administrative issues or other hiccups.

The majority of SME employees with offboarding processes in place (65%) report the use of exit interviews. Such one-to-one chats can provide a helpful perspective into an organization’s flaws and areas for improvement, as well as their most valuable practices that can later be used for employee recruitment.

transfer of knowledge in the offboarding process by SMEs in Canada

Transferring knowledge between departing and remaining employees is another vital aspect of keeping up a company’s momentum. Documenting the responsibilities, projects, and tasks of each job position can save time when it comes time to onboard a new employee; be sure to keep these documents updated and stored in a central repository to streamline handovers in the future if and when responsibilities change hands. 

Regardless of how the details of a position are shared, it’s important to facilitate communication via organized meetings or project management steps. Lacking a specific hand-off program (which 9% of employees report missing) could leave teams scrambling in the wake of layoffs.

Tip for HR leaders: Employee departures are an instrumental moment for an organization’s progress amidst hard times. However, almost half of employees (45%) say their company has no strategy to handle this change, while a further 30% aren’t sure if their company has an offboarding process. Make sure your HR department has the tools it needs to facilitate graceful exits and collect feedback via meetings or employee surveys.

The role of upskilling in adapting to changing business needs

Upskilling is defined as the strategy of teaching employees new or diverse skills to close gaps amongst the talent force. It can help employees develop their careers, and could also potentially help companies train employees to fit changing business needs, avoiding redundancies and layoffs.

According to our survey, 41% of employees have been upskilling in the last six months. A further 33% say they haven’t started yet, but plan to do so soon. 

The majority of these upskillers say they’re learning new skills to be better prepared for their jobs. Following this, nearly a quarter (23%) say they’re mainly upskilling to be able to work on specific projects, which implies that most people who are upskilling are looking to apply their new knowledge in their current workplace instead of looking outside of it.

the reasons for upskilling team members

Although few, some respondents have decided to upskill themselves out of fear of future layoffs, with 2% trying to make themselves indispensable by learning new skills. 

Tip for HR leaders and managers: Regardless of their motivations, SME managers should empower employees seeking to gain new knowledge by providing access to diverse learning management systems (LMS). Out of upskilling employees, almost half (44%) are using short online courses like those provided by an LMS. A third (33%) are using video platforms, followed by over a quarter (27%) relying on on-site workshops, and around a quarter (26%) using reading materials.

Takeaway tips for handling layoffs in Canada

Not only are tips for handling layoffs in Canada vital in keeping a positive workplace ambience and progression, but they can also serve to help support remaining employees after layoffs. 

To keep the momentum going while maintaining positive relationships between employers and employees, try these tips:

  • Stay aware of both provincial and federal regulations when it comes to handling layoffs and mass terminations to avoid fees after the event
  • Communicate both the events and reasons for layoffs to promote a transparent, trust-based workplace
  • Build a clear offboarding process to handle employee exits gracefully
  • Consider providing upskilling opportunities to help employees avoid redundancy or prepare for new jobs after layoffs
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To collect the data for this study, Caperra conducted a survey from May to June 2023. To do this, a sample of 1,002 people were selected. The sample of participants is representative of the population of Canada regarding aspects of gender, and the criteria for selecting participants are as follows:

  • Between 18 and 65 years old
  • Employed part- of full-time in a junior, intermediate, manager or executive position
  • Work in a small to midsize enterprise (SME) with anywhere between 2-250 employees
  • Have been working in the same company for at least one year