Pulling back on temporary foreign workers: a turning point for talent strategy

In a recent announcement, the federal government revealed that Temporary Foreign Worker Program (TFWP) applications have declined sharply: roughly 50 percent overall, with a 70 percent drop in the low-wage stream.  Alongside the drop, enforcement has intensified: in 2024–25, over 1,400 employer compliance inspections took place, penalties more than doubled to nearly $4.9 million, and 36 employers were banned from using the program entirely. 

These twin moves, contraction plus stricter oversight, are a clear signal: Ottawa is tightening the rules around foreign labour access and leaning harder on the idea that Canadian workers should be first in line. The implications could reshape how companies think about sourcing, wage pressure, and risk in staffing strategy.

A Changing Landscape for Labour Supply

Historically, for sectors facing chronic shortages such as agriculture, food processing, construction, health care, TFWP has acted as a pressure valve. When domestic labour couldn’t fill every role, foreign workers provided flexibility. That buffer is now being squeezed. As applications shrink, employers reliant on lower-wage temporary labour may find fewer fallback options.

The government has tightened several levers:

• Low-wage positions are now refused in census metropolitan areas (CMAs) where unemployment exceeds 6%.  
• Caps have been placed on how many low-wage temporary workers a single employer can hire, in many cases capping at 10 percent of workforce (20 percent in certain sectors).  
• Noncompliance is being punished more aggressively: fines, bans, and public disclosure of violations.  

Taken together, these suggest a shift: foreign workers are no longer a “just-in-case” lever but a tightly regulated, risk-aware tool.

What This Means for Staffing, HR, and Employers

1. Talent sourcing must lean more heavily on domestic pipelines.

If the TFWP taper continues, organizations will need to double down on recruiting Canadians and permanent residents, upskilling, and internal development. Reliance on external foreign labour becomes costlier both financially and from a compliance/risk perspective.

2. Wage pressure may intensify upward.

With fewer foreign labour options in the low-wage stream, employers may have to bid more aggressively for domestic workers. This could accelerate wage growth in sectors that have long competed on low-cost labour margins.

3. Compliance risk becomes central.

The rising cost of noncompliance, including multi-million dollar fines and program bans, raises the stakes. HR and legal teams need to be more vigilant. Audits, recordkeeping, worker treatment, and documentation will likely come under more internal review.

4. Rethinking contract models & project planning.

Industries accustomed to scaling via TFWs, such as seasonal agriculture, construction or food processing may need to re-evaluate how they structure projects, staffing plans, and contingencies. Project timelines, margins, and labour forecasts all may shift.

5. Opportunity and pressure for training & retention strategies.

Because the path to filling roles may become narrower, organizations that invest in training, retention, and internal mobility will gain a competitive edge. Those that rely on external hires may struggle.

Risks, Friction, and What to Watch

The move isn’t without risks or tensions. Critics may argue it could exacerbate labour shortfalls, especially in remote regions or tight sectors. Also, sudden shifts in policy or enforcement could create uncertainty: businesses planning to rely on TFWs may find their strategies disrupted.

Over the coming months, some metrics will be especially telling:

• Whether the decline in TFWP applications continues (or reverses)
• Trends in wages and turnover in traditionally TFW-reliant sectors
• Volume and value of fines or bans imposed on noncompliant employers
• Shifts in recruitment intensity or training investment by employers
• Regional differences: which provinces or industries feel the squeeze most

Ultimately, Canada’s move to pull back on foreign labour access is a shift in its labour doctrine: from adding supply to policing and protecting it. For HR leaders, staffing firms, and labour planners, this may mark a turning point; one calling for sharper strategy, closer oversight, and a renewed focus on building domestic talent pipelines.