2025 federal budget: What Canadian employers need to know

The federal government’s 2025 budget sends a clear message to businesses across Canada. Innovation, talent and long-term economic growth are national priorities. For employers navigating a competitive labour market and a fast-changing business landscape, this year’s measures introduce new opportunities, especially around R&D, funding access and skilled talent pipelines.

At Employment Hero, we’re here to help businesses stay ahead of these changes. Here’s a breakdown of what the budget means for employers.

Stronger R&D incentives to boost innovation and growth

Research and development (R&D) is at the heart of Canada’s innovation agenda. This year’s budget significantly strengthens the Scientific Research and Experimental Development (SR&ED) program, a key tax incentive relied on by thousands of Canadian businesses.

More generous funding for innovative companies

Enhanced SR&ED credits are now available on a larger number of eligible expenses. This adjustment is especially impactful for tech companies, advanced manufacturers, engineering firms and any organization with research-intensive operations.

Capital equipment is eligible again

Machinery and equipment used for experimental development will once again qualify as SR&ED expenditures. For employers planning major technology or infrastructure upgrades, this lowers the financial barrier to innovation.

Public companies can now access enhanced credits

Previously, the enhanced SR&ED rate was limited to private corporations. The budget removes this restriction, allowing smaller publicly traded companies, particularly in tech and cleantech, to benefit.

New pre-approval process for R&D projects

One of the most employer-friendly changes is the introduction of an upfront project assessment. Instead of waiting until year-end, businesses can confirm whether a project qualifies before starting it. This makes budgeting, forecasting and hiring decisions far more predictable.

What this means:
Greater funding certainty, lower innovation risk and a more supportive environment for technical talent and R&D teams.

More capital for scaling companies

Canadian businesses often excel at the startup stage but face challenges accessing capital as they grow. The 2025 budget aims to close this gap.

A major investment in Canadian scale-ups

An additional $1 billion has been allocated to the Business Development Bank of Canada (BDC) to help high-potential companies move from early success to large-scale operations.

Ongoing backing for IP protection and commercialization

Several national intellectual property (IP) programs will continue to receive funding. These initiatives help businesses protect, manage, and commercialize the IP  they create.

For employers, this means:

• More stability during fundraising
• Increased capacity for creating high-value jobs
• Stronger support for keeping IP and the skilled work behind it within Canada

A renewed strategy to attract and retain skilled talent

Skills shortages remain one of the biggest challenges facing Canadian employers. The budget’s talent initiatives are designed to help businesses hire more efficiently and reduce time-to-fill for high-demand roles.

A new international talent attraction strategy

This strategy aims to make Canada more competitive in drawing global talent, particularly in disciplines where domestic shortages persist.

Improved recognition of international credentials

Professionals trained abroad, including engineers, IT specialists, tradespeople and health-sector workers, may soon face fewer barriers to entering the Canadian workforce.

A more efficient immigration pathway for employers

With streamlined processes and clearer qualification routes, employers can expect more predictable timelines when hiring internationally.

This is good news for businesses struggling to fill critical roles. It enables them to expand their recruitment strategies and build more diverse, globally competitive teams.

Key takeaways for employers

The 2025 federal budget supports employers in three major ways:

1. More support for innovation

Enhanced SR&ED incentives reduce financial risk and encourage companies to invest in new products, technologies and processes.

2. Better access to growth capital

BDC’s expanded funding capacity strengthens the path for scaling companies, especially those preparing to hire or expand their teams.

3. Stronger talent pipelines

Improvements in immigration and credential recognition help employers access a broader pool of skilled workers.

What employers should do next

As these measures roll out, employers may want to:

• Review potential eligibility for expanded SR&ED benefits
• Evaluate upcoming capital expenditures for R&D alignment
• Reassess hiring strategies, particularly for specialized or hard-to-fill roles (consider Employment Hero’s all-in-one Employment Operating System)
• Strengthen internal processes around immigration and global mobility
• Revisit long-term growth and funding plans

Employment Hero will continue to monitor how the 2025 budget impacts employers. Our goal is to ensure Canadian businesses have the tools, insights, and workforce support they need to thrive in a rapidly evolving landscape.

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