Key Rule Changes Affecting Employer and Foreign Workers

Canada is making significant changes to its Temporary Foreign Worker Program (TFWP), with new regulations. These changes are aimed at addressing labor shortages while prioritizing the hiring of Canadian workers. By tightening wage requirements and increasing compliance checks for employers, the Canadian government seeks to establish a fairer labor market.

These reforms will impact both employers who rely on foreign labor and workers hoping to secure jobs in Canada. Understanding these modifications is essential for navigating Canada’s new work permit system effectively.

Key Changes to Canada’s Work Permit System

In 2024, Canada is introducing several new regulations to its work permit system, particularly through the Temporary Foreign Worker Program (TFWP). These changes include stricter business legitimacy requirements for employers, higher wage thresholds for foreign workers, and more stringent rules in the low-wage stream. Let’s dive deeper into each of these changes and understand their implications.

1. Effective October 28, 2024: New Business Legitimacy Requirements

One of the most significant changes coming into effect is the stricter verification of business legitimacy. Starting October 28, 2024, employers will no longer be allowed to use attestations from accountants or attorneys to prove the authenticity of their business. Instead, the government will use existing employer registrations and agreements with provincial and territorial authorities to verify that a business is legitimate.

This change aims to reduce fraud within the TFWP by ensuring that only legal, registered businesses can hire foreign workers. For employers, this means they must maintain up-to-date registrations with relevant authorities and meet all provincial or territorial regulations. Businesses that fail to comply will no longer be eligible to hire foreign workers under the program, which could be a significant setback for industries that rely heavily on international talent.

2. Effective November 8, 2024: Higher Wage Thresholds for High-Wage Stream Jobs

Another major update will affect foreign workers hired under the high-wage stream. As of November 8, 2024, the minimum wage for these workers must be 20% higher than the median wage in the province or territory where the job is located. Depending on the region, this could mean an hourly wage increase of $5 to $8.

This change is designed to encourage employers to hire Canadian workers by making foreign labor less cost-competitive. It is anticipated that around 34,000 jobs will move from the high-wage stream to the low-wage stream due to this adjustment, with an estimated 20,000 fewer overall approvals under the TFWP.

Employers who rely on foreign workers will need to reassess their wage structures to remain compliant. While this could mean higher costs for businesses, it is expected to reduce the number of foreign workers in non-essential roles and promote greater reliance on domestic labor.

3. Stricter Rules for Employers in the Low-Wage Stream

The low-wage stream of the TFWP will also see stricter rules under the new regulations. Employers in this stream are required to provide adequate housing and arrange for return transportation for their workers. Furthermore, businesses must demonstrate additional recruitment efforts to hire Canadian workers before turning to foreign talent.

Specifically, employers in non-essential industries will only be able to hire up to 10% of their workforce through the TFWP, with some exceptions for high-demand sectors such as healthcare and agriculture. Applications for low-wage jobs in areas with an unemployment rate of 6% or higher will not be processed. This rule is particularly relevant for Census Metropolitan Areas (CMAs) with high unemployment, where the government aims to prioritize domestic workers.

These new regulations are intended to reduce the country’s dependence on low-paid foreign labor, ensuring that Canadian workers have more opportunities. Employers in industries like retail or hospitality, which often rely on foreign workers, will need to adjust their hiring practices to meet these new criteria.

Canadian Labor Market and Unemployment Statistics

The changes to the TFWP are part of Canada’s broader effort to address unemployment and labor market imbalances. To understand the rationale behind these changes, let’s take a closer look at Canada’s unemployment statistics:

• Youth Unemployment: As of September 2024, Canada’s youth unemployment rate stood at 13.5%, more than double the national average of 6.5%. This high rate suggests that more needs to be done to provide job opportunities for younger Canadians.
• Indigenous Workers: The unemployment rate for Indigenous people was 7.7% in 2023, compared to 4.5% for non-Indigenous Canadians aged 25–54. The government aims to reduce this disparity by encouraging employers to hire from underrepresented communities.
• People with Disabilities: In 2022, the employment rate for people with disabilities was 65.1%, compared to 80.1% for people without disabilities. The government hopes that by reducing reliance on foreign labor, more employers will tap into these underutilized labor pools.

These statistics highlight the importance of promoting domestic hiring, which is a key goal of the TFWP reforms. By reducing access to foreign labor, the government aims to create more opportunities for these groups, contributing to a more inclusive labor market.

Impact on Employers and Workers

The upcoming changes to the TFWP will have a broad impact on both employers and foreign workers. Here are some of the key implications:

1. Increased Costs for Employers

For employers in the high-wage stream, the requirement to raise wages by 20% above the median provincial wage will increase labor costs. Businesses that rely heavily on foreign workers may face reduced profitability, especially in industries with thin margins. Employers will need to weigh the costs of hiring foreign talent against the potential benefits of using local labor.

2. Decreased Program Access for Employers in Low-Wage Industries

The new rules in the low-wage stream will make it more difficult for employers to access foreign labor. With stricter recruitment efforts required and a cap on the number of foreign workers that businesses can hire, employers in industries like retail, hospitality, and food service will face additional challenges. Those in regions with high unemployment may not be able to use the TFWP at all, as applications for low-wage jobs will be restricted.

3. Promoting Domestic Hiring

One of the primary objectives of these reforms is to encourage employers to hire more Canadian workers. The government hopes that by raising wage requirements and tightening the rules around foreign labor, businesses will turn to underrepresented groups, such as youth, Indigenous people, and workers with disabilities. This shift could lead to greater economic participation among these groups and help reduce Canada’s reliance on temporary foreign workers.

Conclusion

The upcoming changes to Canada’s work permit laws under the Temporary Foreign Worker Program represent a major shift in the country’s labor market strategy. These reforms, which take effect on October 28 and November 8, 2024, are designed to reduce reliance on foreign labor while prioritizing the hiring of Canadian workers. Employers will face stricter rules around business legitimacy, higher wage requirements, and increased compliance checks, making it essential for businesses to adapt quickly.

For foreign workers, the changes mean fewer job opportunities under the TFWP, particularly in low-wage industries. However, these reforms are intended to create a more balanced labor market, with greater opportunities for underrepresented groups in Canada. As the government continues to monitor the impact of these changes, businesses and workers alike will need to stay informed and proactive in adjusting to the new work permit regulations.

Following these updates is crucial for staying compliant and taking advantage of available opportunities in the evolving Canadian labor market.