Canada’s Middle Management Job Cuts Are Coming, According to Expert Howard Levitt

December 24, 2024February 6, 2025 moneymetrics.org_admin Economy

As we enter a new year, Canadian employees would do well to heed the warning signs from across the border. A recent article in The Wall Street Journal painted a stark picture of the massive downsizing of middle management positions in the United States. And while the reasons behind this trend are complex and multifaceted, one thing is clear: Canada is not immune.

Table of Contents

The Perfect Storm

A perfect storm of factors has contributed to the decline of middle management in the US. The drive for greater efficiency, higher profits, increased international competition, and the impact of artificial intelligence have all combined to eliminate many of the employees occupying those positions between front-line workers and the executive team.

According to research firm Gartner, U.S. managers now oversee three times the number of employees they did in 2017. Meanwhile, LinkedIn’s Workforce Confidence survey found that close to one-third of employees claim to have bosses who are too stressed to support them. It’s a trend that is unlikely to abate anytime soon.

Why Canada is Worse Off

But while US employers are struggling with the consequences of middle management downsizing, Canadian employers face an even more daunting challenge. The Liberal government’s policies have led to declining productivity and a resulting increased productivity gap with the US. Higher taxes, reduced foreign investment, and the Trump administration’s emphasis on reshoring have all made the plight of Canadian employers worse than their US counterparts.

The Demotion Dilemma

One of the most significant challenges facing Canadian employers is the issue of demotions. In many states in the US, demoting an employee can be a relatively straightforward process. However, in Canada, demotions are often subject to strict regulations and can be a complex and costly exercise.

Advance notice is required, and the length of notice for a demotion is identical to that of a dismissal. This creates a dilemma for employers who wish to retain employees but need to downsize their operations.

The Cost of Severance

For Canadian employers, the cost of severance can be prohibitively expensive. The law requires employers to provide employees with reasonable notice or pay in lieu of notice, which can add up quickly. According to a recent study, the average cost of a wrongful dismissal case in Canada is over $200,000.

In addition, the likelihood of an employee accepting a demotion and staying on with the company is low. Employees who are demoted often feel undervalued and unappreciated and may seek other opportunities elsewhere.

The Unforeseen Consequences

As Canadian employers grapple with the challenges of middle management downsizing, they must also contend with unforeseen consequences. An abundance of management layoffs will mean far fewer comparable positions for laid-off employees to secure, resulting in greater severance pay.

This will further worsen the plight of Canadian employers and set up an unanticipated corporate crisis for the next government to contend with.

Conclusion

The middle management cull is coming to Canada, too. Employers must be prepared to adapt to a new reality where downsizing is inevitable. While the cost of severance may seem daunting, it’s essential to consider the long-term benefits of retaining employees and investing in their development.

As we enter this new year, Canadian employers would do well to heed the warning signs from across the border. The future of middle management in Canada is uncertain, but one thing is clear: change is coming, and it’s essential to be prepared.

About the Author

Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta, and British Columbia. He practices employment law in eight provinces and is the author of six books, including the Law of Dismissal in Canada.