Canadian small businesses increased their average workforce by 44 per cent between 2019 and 2025 while reducing employee turnover and raising median hourly pay faster than inflation, according to a new report from payroll software provider Wagepoint.
The company’s 2026 Canadian Small Business Workforce Report, based on aggregated payroll data from approximately 6,800 Canadian small and mid-sized businesses, found that average headcount rose to 19.1 employees from 13.3 in 2019. The annual employee separation rate fell to 27 per cent from 38 per cent over the same period.
The findings also show a significant shift in workforce demographics, with Generation Z accounting for 38 per cent of employees at participating businesses in 2025, up from 18 per cent six years earlier. Millennials represented 41 per cent of the workforce, down from 55 per cent.
The report examines payroll data covering actual hires, departures and compensation from 2019 to 2025, offering a view of how participating small businesses have changed their staffing practices, workforce composition and pay levels.
Hourly wages outpace inflation
Median hourly pay increased 27 per cent over the six-year period, rising to $26.70 from $20.97, compared with an approximately 20 per cent increase in consumer prices, according to the report. Median full-time salaries rose by about 14 per cent.
The data also indicates that small businesses shifted toward full-time employment as their teams expanded. Part-time positions accounted for 69 per cent of headcount in 2025, down from 79 per cent in 2019.
Together, the changes point to a workforce that has grown in size while experiencing lower employee separation rates and higher hourly compensation. The report notes that larger teams create additional payroll and staffing responsibilities for business owners, including onboarding, accurate pay administration and employee retention.
The findings also have implications for accountants and bookkeepers who support small businesses, as payroll becomes a more significant part of the advice clients require when managing staffing and labour costs.
“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,” said Ben Richmond, CEO of Wagepoint. “These trends matter because small businesses are a major part of Canada’s economy, yet their workforce realities can be overlooked in broader employment data. Seeing how teams are growing, who’s entering the workforce, and how wages are keeping pace with inflation helps us better understand the pressures and opportunities facing small businesses today.”
Gen Z gains share of small-business workforce
The growing representation of younger workers was one of the report’s key findings. Gen Z’s share of employment more than doubled between 2019 and 2025, while the proportion of millennials declined, leaving the two generations accounting for a combined 79 per cent of the workforce in 2025.
The figures reflect changes in the composition of employees at businesses included in Wagepoint’s data rather than estimates covering every Canadian small business.
The report’s analysis is based on de-identified, aggregated payroll information from approximately 106,000 employees at businesses that used the platform during the six-year period. Partial-year 2026 data was excluded.
Wagepoint said the figures represent trends among businesses that operate formal payroll systems and should not be interpreted as estimates of the company’s market share or of the entire Canadian business population.
Regional workforce trends vary
Western Canada recorded the largest increase in average workforce size among the three regions examined, with headcount rising 53 per cent to 18 employees per business in 2025 from 11.8 in 2019. The region also had the highest median hourly pay, at $27.58.
Central Canada had the largest businesses on average, with 20 employees in 2025, up from 14.5 six years earlier. The region’s annual employee separation rate declined to 26 per cent from 39 per cent.
In Atlantic Canada, Gen Z’s share of the workforce rose to 37 per cent in 2025 from 14 per cent in 2019, the largest increase among the regions. The report notes that this shift occurred despite the region having Canada’s oldest population.
Median hourly pay in Atlantic Canada increased 33 per cent during the period, rising to $25.19 from $18.95.
The regional results show that workforce growth, employee retention and wage increases varied across the country, with Western Canada leading in average headcount growth, Central Canada reporting the largest average business workforces and Atlantic Canada recording the largest increase in Gen Z representation.
Wagepoint, founded in 2012, provides payroll software to Canadian small businesses, accountants and bookkeepers. The company says more than 30,000 businesses, accountants and bookkeepers rely on its platform.
The full report is available at Wagepoint’s website
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