Employers are placing renewed emphasis on enhancing the employee experience in 2026, with compensation emerging as the dominant factor in both satisfaction and retention, according to a survey of 1,008 Canadian businesses by ADP Canada.
Sixty-one per cent of Canadian businesses recognize compensation as the leading factor in overall employee satisfaction, far exceeding flexible hours at 39 per cent, the survey found. When it comes to retention, pay remains the most dominant factor at 44 per cent, with flexible hours ranking second.
The research, conducted by Earnscliffe Strategies from Sept. 4 to 16, 2025, surveyed business owners, payroll and HR senior leaders and decision-makers across companies of all sizes.
Employee experience challenges persist
Despite the focus on improving employee experience, significant gaps remain in foundational HR processes. Only 46 per cent of employers rate their onboarding as very efficient, 43 per cent feel the same about their hiring practices, and just 36 per cent believe their offboarding processes are very efficient, according to the survey.
Over half of employers express low confidence in their ability to collect meaningful employee feedback or access reliable sentiment data.
Turnover patterns reveal ongoing organizational challenges. Forty-one per cent of small businesses in Canada report experiencing turnover in the past year, compared to 61 per cent of midsized companies and 72 per cent of large companies. Turnover is most frequently reported in operations (33 per cent), administration (30 per cent) and client services (28 per cent).
The key contributors to turnover include high workloads (26 per cent), understaffing (24 per cent) and dissatisfaction with pay (24 per cent). Millennials are particularly affected, with 63 per cent of all companies noting turnover within this demographic in the last six months.
Well-being commitments face implementation gaps
Eighty-seven per cent of employers believe they are responsible for supporting their employees’ mental well-being, according to the survey. However, fewer than half (46 per cent) currently offer mental health benefits, primarily due to cost barriers.
Among employers who do offer mental health benefits, only 35 per cent of companies are confident they are providing their employees with access to affordable, high-quality mental health care.
Eighty-three per cent of employers agree they have a responsibility to support employees’ physical well-being, while 68 per cent agree they have a responsibility to support employees’ financial well-being.
Canadian workplace trends 2026: Key data points
| Category | Metric | Finding |
|---|---|---|
| Employee Satisfaction | Top factor driving satisfaction | 61% say compensation |
| Second factor | 39% say flexible hours | |
| Employee Retention | Top factor driving retention | 44% say pay |
| Millennial turnover (past 6 months) | 63% of companies experienced it | |
| HR Process Efficiency | Very efficient onboarding | Only 46% |
| Very efficient hiring | Only 43% | |
| Very efficient offboarding | Only 36% | |
| Turnover by Company Size | Small businesses | 41% experienced turnover |
| Midsized companies | 61% experienced turnover | |
| Large companies | 72% experienced turnover | |
| Top Turnover Drivers | High workloads | 26% |
| Understaffing | 24% | |
| Pay dissatisfaction | 24% | |
| Mental Health Support | Feel responsible for mental well-being | 87% |
| Actually offer mental health benefits | 46% | |
| Confident in quality of care provided | 35% | |
| Skills Employers Seek | Strong work ethic | 66% prioritize |
| Attention to detail | 41% prioritize | |
| Time management | 38% prioritize | |
| Skills Gaps | Can’t find strong work ethic | 38% struggle |
| Can’t find detail-oriented workers | 24% struggle | |
| AI Skills | Large companies that see AI skills as essential | 75% |
| Large companies actively hiring for AI skills | 13% | |
| Small businesses that see AI skills as essential | 47% | |
| AI in HR | Using AI for skills development | 19% |
| Using AI for compliance | 21% | |
| Have AI ethics policy | 22% | |
| Employees fearful of AI displacement | 38% | |
| Agentic AI Usage | Small businesses | 17% |
| Midsized businesses | 26% | |
| Large businesses | 36% | |
| Top Compliance Challenges | Data privacy | 16% |
| Paid leave | 14% | |
| Payroll tax requirements | 11% | |
| Information Security | Concerned about data breaches | 68% |
| Concerned about cyberattacks | 55% | |
| Concerned about AI-enabled attacks | 45% |
Skills gaps widen as AI adoption lags
A strong work ethic emerges as the defining skill that employers prioritize when searching for new hires. Sixty-six per cent of employers identify a strong work ethic as their top priority, followed by attention to detail (41 per cent), time management (38 per cent), problem-solving abilities (35 per cent) and teamwork (33 per cent).
However, 38 per cent of employers struggle to find a strong work ethic in applicants. Other critical skills are also in short supply, with 24 per cent struggling to find detail-oriented individuals, 24 per cent facing difficulties identifying proficient time managers, and 22 per cent unable to locate effective leaders and critical thinkers.
When it comes to AI skills, 75 per cent of larger companies in Canada and 61 per cent of midsized companies recognize their essential role in maintaining competitiveness. However, only 13 per cent of large companies and five per cent of midsized companies actively prioritize hiring for AI competencies. Smaller organizations reflect an even lower sense of urgency, with just 47 per cent considering AI skills essential and only five per cent prioritizing their recruitment.
Despite recognizing AI’s potential, only 19 per cent of organizations are currently using AI for employee skills development. Sixty-six per cent of organizations disagree that generative AI will replace traditional employee skills development and training methods.
Agentic AI adoption increases with company size
Agentic AI — systems that autonomously think, plan and act to achieve multistep goals with minimal human oversight — is being used in some capacity at businesses of all sizes. Usage increases with business size: 17 per cent of small businesses report using agentic AI, compared to 26 per cent of midsized businesses and 36 per cent of large businesses.
Sixty-eight per cent of small businesses say they are familiar with agentic AI, compared to 61 per cent of midsized businesses and 65 per cent of large businesses.
Eighty per cent of small, midsized and large Canadian organizations agree on the importance of maintaining human oversight in AI applications, while 64 per cent recognize the need to cultivate trust when using AI. However, 38 per cent of Canadian organizations have employees who are fearful of being displaced by AI.
Compliance challenges grow with business size
Compliance challenges tend to increase as companies grow. Almost half (49 per cent) of small businesses report they do not encounter compliance challenges, compared to 40 per cent of midsized companies and 30 per cent of large organizations.
Among those that do face compliance challenges, organizations in Canada identified data privacy (16 per cent), paid leave (14 per cent), payroll tax requirements (11 per cent), pay transparency (11 per cent) and overtime regulations (11 per cent) as the top five hurdles.
Beginning January 2026, employers in Ontario with 25 or more employees are required to include compensation or a compensation range in publicly posted job positions. Employers must also state if the position is an existing vacancy or a new role, disclose if AI is used in the hiring or screening process, and inform candidates of hiring decisions within 45 days of the last interview.
AI ethics policies remain uncommon
Seventy per cent of Canadian businesses do not have an AI ethics policy. Nearly half (46 per cent) agree that ethical management of AI and AI systems is a priority, yet only 22 per cent have taken the step to establish an AI ethics policy.
Only 21 per cent of companies use AI for compliance tasks, and among those that do, 51 per cent express strong trust in AI’s accuracy. Among businesses that have yet to adopt AI for compliance, only 10 per cent are considering implementation in the future.
Openness to AI adoption varies by organization size, with larger companies demonstrating greater openness at 19 per cent, compared to only 10 per cent of small businesses and 11 per cent of midsized businesses.
Data security concerns intensify
Most companies (82 per cent) express at least some level of concern regarding threats to information security. Their primary concern is data breaches, which rank first at 68 per cent. Other concerns include traditional cyberattacks (55 per cent) such as phishing, malware and ransomware, followed by the potential for AI to be leveraged for malicious attacks (45 per cent).
Thirty-nine per cent of companies are concerned about unauthorized access to company data, while 33 per cent are worried about employee data being accessed without authorization. Compliance with data privacy laws and regulations is also a concern for 30 per cent of organizations.
Seventy-seven per cent of organizations prioritize managing employee and company data ethically, with this emphasis intensifying as business size grows. Fifty-nine per cent of organizations have established policies and guidelines for the ethical management of data, with a notable increase among larger businesses.
HR and IT convergence accelerates
The relationship between HR and IT is becoming more interdependent as AI reshapes the workplace. In a separate 2025 survey of 1,100 IT leaders cited in the ADP Canada report, 64 per cent predicted a complete merger of HR and IT will happen within five years, while 31 per cent predict the functions will not merge but become far more collaborative during that same period.
As agentic AI is adopted across the workforce, human and agent interactions will be critical for delivering work, requiring HR and IT to work closely together to ensure work is done effectively, according to the report.
Multi-generational workforces drive personalized support needs
With five distinct generations collaborating in workplaces, organizations are witnessing challenges in work ethics and commitment levels. Companies identified work ethic and commitment (16 per cent), recruiting and retention difficulties (10 per cent), intergenerational respect (seven per cent), work-life balance expectations (seven per cent) and technology adoption and literacy (five per cent) as key challenges in this environment.
Thirty-five per cent of businesses in Canada employ individuals outside of Canada. The most common challenges faced are employee training and development (34 per cent), followed by talent acquisition at 32 per cent and retention at 27 per cent.
Regional variations emerge
Respondents with operations in Quebec are slightly less likely to say job security and stability are employee concerns (12 per cent) compared to the 17 per cent national average. Respondents in British Columbia and Alberta are more likely to be concerned about these issues (19 per cent).
Leadership and management are the main factors driving turnover in the last year, with Quebec (66 per cent), Ontario (52 per cent) and Atlantic Canada (52 per cent) tracking above the national average of 49 per cent.
The survey sample was drawn from Leger’s panel of Canadians. Respondents were asked about their perceptions on current and future HR trends, data security, advances in AI and economic and business outlook.
