4 Big Trends in Severance and Separation Benefits in Canada (2027 Data)

 

Canadian organizations expect more layoffs in the year ahead. They're also changing how they set severance and who gets support when people leave.

LHH partnered with Censuswide to survey 400 HR and business leaders at Canadian organizations with 500 or more employees. The 2027 LHH Canadian Severance and Separation Benefits Benchmark Study shows how severance policies, outplacement programs, and decision-making have shifted since our last Canadian study in 2024.

Here are the four biggest trends.

1. More organizations expect layoffs, but most look at alternatives first

58% of organizations expect layoffs in the next 12 months, up from 36% in 2024.

The view from the top is sharper. 81% of CEOs expect layoffs, compared with 43% of HR leaders. Publicly traded organizations (67%) expect layoffs more than privately held ones (49%). Aerospace and defence leads all industries, at 95%.

Layoffs are sometimes the only way to protect or grow a business. Canadian organizations still look at other options first. 99% routinely consider alternatives before involuntary terminations, most often:

• Temporary leave (39%)
• Retirement incentives (35%)
• Voluntary departure programs (35%)

Voluntary packages now reach much further into the workforce. 80% of organizations offer them to non-exempt employees, up from 39% in 2024.

2. Severance is more individualized and agreement-driven

Provincial employment standards set the floor for severance in Canada. Common law reasonable notice can push entitlements well past it. That framework hasn't changed, but the way organizations work within it has.

More organizations now decide severance case by case:

• 21% use no set formula, up from 5%
• 35% base severance on age, length of service, job level, and ability to find new work, up from 26%
• 3% give every employee the same flat number of weeks, down from 10%

Those four factors mirror the ones Canadian courts weigh when they set reasonable notice.

Policies are also less formal. 43% of organizations document severance in a written plan, down from 63%. 15% have no written documents at all, up from 3%.

Employment agreements do more of the work instead. 81% of organizations define severance in employment agreements. 57% define it for top executives only, up from 33%. On average, agreements with termination clauses that limit entitlements cover half the workforce.

3. Severance is thinner, but transition support holds

In 2024, Canadian organizations were making severance more generous. That trend has slowed.

• 39% made their severance policy less generous, up from 14%
• 80% pay severance, down from 92%
• 16% of organizations that continue medical coverage keep it through the full severance period, down from 49%

Large organizations lead the shift. 45% of organizations with 5,000 or more employees made severance less generous.

Organizations are also spreading severance more evenly. 72% offer severance to CEOs, down from 93%. 48% offer it to non-exempt employees, up from 38%. The gap between the two shrank from 55 points to 24.

Other support has grown. 95% of organizations offer stay bonuses to keep employees in place until their jobs end, up from 82%. 68% let employees with stay bonuses start outplacement before they leave.

4. Outplacement reaches more people, and finance has a bigger say

Outplacement now covers most of the workforce:

• 81% offer outplacement to exempt employees, up from 51%
• 75% offer it to non-exempt employees, up from 46%
• Nearly 9 in 10 offer it at every level from CEO to professional and technical employees

Programs look more alike across levels too. 43% offer comprehensive programs to CEOs, and 39% offer them to non-exempt employees. Online-only programs for non-exempt employees fell from 24% to 12%.

Who decides has changed. HR leads outplacement decisions at 25% of organizations, down from 59% in 2024. CFOs and procurement teams lead at 35%, up from 6%. CEOs lead at 40%.

With more separations ahead, finance teams want closer oversight of every separation dollar. HR and finance leaders who plan together can build programs that treat people fairly and fit the budget.

What changed since 2024

Our 2024 Canadian study found three big trends. Here's how each one has shifted.

• More generous packages. In 2024, Canadian organizations were adding to severance. In 2027, 39% made it less generous, up from 14%.
• More formal policies. In 2024, 63% documented severance in a written plan. In 2027, that fell to 43%, and more organizations decide severance case by case.
• Technology-driven outplacement. In 2024, 31% called technology the most important outplacement resource. In 2027, that fell to 27%. A blend of technology and in-person support now leads at 41%, up from 28%.

Digital tools help people move quickly. Coaches help them make good decisions about their next role. Canadian organizations now see the value of both.

Frequently asked questions

How many Canadian companies offer severance?

80% of organizations pay severance, whether or not they have a formal policy, down from 92% in 2024. Eligibility varies by level. 72% offer severance to CEOs, and 48% offer it to non-exempt employees.

Are severance packages getting smaller in Canada?

For many organizations, yes. 39% made their severance policy less generous in the last two years, up from 14% in 2024. Half (51%) still made it more generous.

How do Canadian companies calculate severance?

35% base severance on a mix of age, length of service, job level, and ability to find new work. 21% use no set formula. Only 3% give every employee the same flat number of weeks.

Do employment agreements limit severance in Canada?

Often. 81% of organizations define severance in employment agreements. On average, agreements with termination clauses that limit entitlements cover half the workforce.

How many Canadian companies offer outplacement?

81% offer outplacement to exempt employees and 75% to non-exempt employees. Nearly 9 in 10 offer it at every level from CEO to professional and technical employees.

Who decides on outplacement benefits?

CEOs lead outplacement decisions at 40% of organizations. CFOs and procurement lead at 35%, and HR leads at 25%, down from 59% in 2024.

 

See how your program compares

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About the research: Censuswide surveyed 400 HR and business leaders at Canadian organizations with 500 or more employees between September 9 and September 22, 2026. Comparisons to 2024 use the published 2024 Canadian results, which included HR leaders only at organizations of all sizes. The 2024 survey asked about severance policy changes over the previous three years. The 2027 survey asked about the previous two.