Fresh findings from Wagepoint reveal that Gen Z employees now comprise 38% of the workforce within Canadian small businesses—a significant transformation in hiring practices since 2019. The 2026 Canadian Small Business Workforce Report also highlights a decline in employee departures despite the growing presence of younger workers.
Between 2019 and 2025, annual separations decreased from 38% to 27%, while the average number of employees per business climbed 44%, from 13.3 to 19.1. The analysis draws on anonymized payroll data from approximately 6,800 small and mid-sized Canadian businesses, representing over 106,000 workers.
Demographic Shifts in the Workforce
While Millennials still represent the largest group at 41% in 2025, their share has shrunk from 55% six years earlier. Combined, Millennials and Gen Z now make up 79% of small business employees. The data contradicts the widely held belief that younger workforces lead to higher turnover rates.
Instead, employers appear to be retaining staff longer, even as Gen Z’s representation surged from 18% to 38%. Additionally, wage growth has varied significantly between hourly and salaried positions, with median hourly earnings increasing 27%, from CAD $20.97 to CAD $26.70, since 2019.
Regional Differences in Workforce Trends
The report shows that workforce changes have not been uniform across Canada. Western Canada saw the most substantial growth in average team size, expanding 53% from 11.8 to 18.0 employees, while also recording the highest median hourly wage at CAD $27.58.
Central Canada boasts the largest average business size, with 20.0 employees in 2025 compared to 14.5 in 2019. The region’s employee separation rate dropped from 39% to 26%. Meanwhile, Atlantic Canada experienced the steepest rise in Gen Z hiring, with their share jumping from 14% to 37%.
As businesses expand and shift toward more full-time roles, payroll operations have evolved into a core function rather than a back-office necessity. This transition may increase demand for professional guidance, particularly in areas like hiring strategies, employee classification, compensation structures, and retention efforts.
Key Takeaways from Payroll Analysis
Ben Richmond, CEO of Wagepoint, noted that payroll records offer an unfiltered perspective on workforce developments. “Payroll data gives us a real-world view of how Canada’s small businesses are changing, from who they hire to how they pay and retain their people,” Richmond said.
Richmond emphasized that these trends are critical because small businesses play a foundational role in Canada’s economy, yet their workforce trends are often overshadowed in broader employment discussions. Tracking team growth, generational shifts, and wage adjustments helps clarify the challenges and opportunities small employers face today.