Two-Thirds of Canadian Small Businesses Still Plan to Hire as 62% Raise AI Spending

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Canadian small businesses are entering the second half of 2026 with an unusual combination of restraint and ambition. New Employment Hero research says 66% of Canadian SMEs expect to hire over the next six months when expansion and selective hiring are combined, while 62% report increasing investment in artificial intelligence. At the same time, productivity, wages and talent acquisition remain major pressures, suggesting owners are not simply opening the spending taps.

The picture is less about AI replacing workers than businesses trying to get more from every new hire and every technology dollar. Broader Canadian data shows AI adoption is rising quickly but remains uneven, while the national labour market is improving without returning to the tight conditions seen earlier in the decade. The result is a small-business economy that still wants to grow, but with far greater scrutiny on skills, productivity and return on investment.

Hiring Intent Is Strong, but Employers Are Being Selective

Canadian small and medium-sized employers are not retreating from hiring, but they are drawing sharper lines around where new people fit. Employment Hero’s inaugural SME Pulse found that 34% of respondents expect to expand hiring over the next six months, while another 32% plan to hire selectively. Together, that produces the 66% headline figure. It is a meaningful signal, especially because 58% of the 600 Canadian business leaders polled said they were optimistic about the next six months, compared with 18% who were pessimistic.

A separate Robert Half study released in late July points in the same direction from a different sample. Among more than 1,360 Canadian hiring managers, 58% said they expected to increase permanent hiring during the second half of 2026, and 45% expected to bring in contract professionals. The overlap suggests that many employers still see growth opportunities, but the emphasis is increasingly on targeted capability. For a small firm, one experienced salesperson, technician or finance specialist can matter more than a large wave of general hiring.

Optimism Does Not Mean Businesses Are Spending Freely

The hiring plans sit inside a much more cautious business mood than the topline 66% might suggest. Employment Hero found productivity was the most commonly cited pressure, named by 41% of respondents, followed by wages at 39% and hiring or talent acquisition at 36%. Only 26% said expansion or growth was their primary financial focus for the next six months, while 41% said they were trying to balance growth with operational stability. That is a picture of owners still willing to invest, but with little appetite for waste.

Other Canadian indicators reinforce that restraint. The Bank of Canada’s second-quarter Business Outlook Survey said employment intentions remained weaker than their historical average, even as investment intentions stayed relatively strong. CFIB’s July Business Barometer showed small-business confidence improving to 58.3, but that polling was conducted before the latest escalation in U.S. tariffs. In practical terms, businesses may still add staff while postponing anything that does not solve an immediate sales, service or productivity problem.

AI Budgets Are Growing Faster Than AI Adoption

The 62% figure on AI investment is striking, but it should not be confused with the share of all Canadian businesses already using AI deeply. Employment Hero asked its SME respondents whether they were increasing investment in AI, and nearly two-thirds said yes. Statistics Canada, using a much broader national business sample, found that 19.2% of businesses had actually used AI to produce goods or deliver services during the previous 12 months in the second quarter of 2026, up from 12.2% a year earlier and 6.1% in 2024.

BDC offers another useful benchmark. Its 2026 research said 30% of Canadian SMEs used generative AI in 2025, even though 96% invested in some form of digital technology. Those figures describe different populations and questions, but together they show the same direction: AI budgets are rising faster than mature deployment. A neighbourhood retailer may spend first on an AI-enabled customer-service tool, while a professional-services firm could be buying document, analytics or workflow software. “More spending” can therefore mean many different levels of transformation.

Canada’s Productivity Problem Is Driving the Investment Push

Productivity appears to be one of the strongest forces pulling small businesses toward AI. In Employment Hero’s poll, 41% of respondents identified productivity as a leading business pressure. That concern sits against a difficult national backdrop: Statistics Canada reported that business-sector labour productivity fell 0.5% in the first quarter of 2026 after slipping 0.3% in the previous quarter. For an owner already dealing with wage bills, financing costs and uncertain demand, technology that saves even a few hours of repetitive work each week can look less like an experiment and more like operating infrastructure.

BDC’s research helps explain the attraction, although its findings should be read as an association rather than proof that AI alone caused the difference. The development bank reported that SMEs using AI were 24% more productive than those that did not, and it has also said more than 78% of Canadian SMEs that invested in AI were satisfied with their return. The most practical gains are often mundane: faster document drafting, better data analysis, more responsive customer service and reduced administrative work.

Employers Still Cannot Easily Find the Skills They Need

More hiring does not mean employers are finding the people they need easily. Employment Hero’s results put wages and talent acquisition among the top three pressures facing Canadian SMEs, which helps explain why businesses can be simultaneously cautious and active in the labour market. A firm may want to add capacity but still reject applicants who cannot immediately fill a specialized gap. That is particularly important for smaller employers, where a poor hire can absorb management time and payroll that cannot easily be spread across a large organization.

Robert Half’s July research makes the skills problem clearer. Fifty-three per cent of Canadian hiring managers said finding qualified talent had become more difficult. Fifty-six per cent reported significant project delays in the previous year, and 48% said projects had been cancelled because the required skills were unavailable. Technical or specialized skills were the most frequently cited hard-to-find capability at 48%, closely followed by industry-specific knowledge at 47%. The result is a hiring market that may feel active without feeling loose: openings exist, but employers increasingly want a close match between the person and the problem.

AI Spending Is Creating a Parallel Need for Training

The parallel rise in AI spending and hiring also raises a basic workforce question: who will know how to use the new tools well? Statistics Canada found that 44.4% of businesses already using AI had changed training or staffing practices because of it. Nearly one-third provided AI-related training to existing employees, while 21.6% trained executives. Among AI-using businesses with at least 100 employees, 68.1% trained existing staff and 32.8% hired people with AI-related skills, showing how quickly implementation can turn into a people-development issue.

CFIB found a similar relationship from another angle. Its February 2026 research concluded that Canadian businesses investing in AI were 5.4 percentage points more likely to invest in employee training after accounting for factors such as firm size, sector and location. Employment Hero’s separate global AI Paradox report found only 38% of businesses had formal AI training programs, while half of workers said their employer was doing little or nothing to help build AI skills. Buying software is therefore only one line in the budget; training determines whether that spending becomes useful capacity.

AI Investment Is Not Automatically Translating Into Job Cuts

The hiring data complicates the popular assumption that every dollar spent on AI must eventually replace a worker. Employment Hero’s global AI Paradox research found that 42% of companies increased entry-level headcount over the previous two years. Among businesses it classified as having AI at the core of operations, 62% grew entry-level headcount, compared with 30% of non-adopters. Only 16% of companies said they had reduced entry-level roles, although AI and automation were the most commonly cited reasons among that smaller group.

That does not prove AI causes hiring. Employment Hero itself notes that highly AI-mature companies may simply be stronger or faster-growing businesses to begin with. Still, other research points toward a similar reshaping rather than a simple disappearance of work. PwC’s 2026 AI Jobs Barometer found headcount growth at the most AI-exposed companies outpaced that at the least exposed. It also found that AI-exposed junior roles were far more likely to demand traditionally senior skills such as leadership and strategic thinking. Entry-level work may survive, but the definition of “entry level” is becoming more demanding.

The Broader Canadian Labour Market Is Improving, but Slowly

The SME hiring outlook is emerging at a moment when Canada’s overall labour market has recently improved, but still carries signs of slack. Statistics Canada reported that employment rose by 75,000 in July 2026, lifting the employment rate to 60.9%. The unemployment rate edged down to 6.4%, its lowest level since July 2024. Those numbers provide a firmer backdrop for businesses considering expansion after a period dominated by trade uncertainty, soft demand and higher operating costs.

Yet the Bank of Canada has continued to describe firms’ employment intentions as weaker than the historical norm, and CFIB’s June reading showed only 12% of small firms planning to hire full-time staff over the next three months, with 11% planning part-time hiring. The difference is partly about timing, samples and wording. Employment Hero counts both businesses expanding and those hiring selectively over six months. The broader lesson is that hiring can strengthen without becoming a generalized boom. Employers appear more willing to recruit, but they are still guarding margins and choosing roles carefully.

Privacy and Cybersecurity Are Becoming Part of the AI Bill

As AI investment moves into ordinary workflows, privacy and cybersecurity become operating issues rather than abstract technology concerns. Statistics Canada found that 13.4% of businesses identified cybersecurity or privacy concerns as a barrier to AI use in the second quarter of 2026, while 10.6% cited cost. The concern was much higher in some data-intensive sectors, including information and cultural industries and health care. A small company that feeds customer records, contracts or employee information into an AI system can create risk long before it considers itself an “AI company.”

The Office of the Privacy Commissioner of Canada found that 16% of businesses in consumer-facing, data-collecting sectors were using AI in operations in early 2026. Most surveyed firms had taken steps toward privacy compliance: 91% said they had acted to comply with privacy laws, 72% had designated someone responsible for privacy and 62% provided regular privacy training. Ottawa has also proposed updated private-sector privacy legislation with rules around automated decision-making and stronger enforcement. As AI budgets rise, governance, access controls and staff training increasingly belong in the same purchasing decision as the software itself.

The Numbers Point to a Shift, Not a Guaranteed Boom

The new SME Pulse is best read as a snapshot of direction, not a census of every small business in Canada. GWI conducted the research for Employment Hero between April and June 2026 among 600 senior Canadian business leaders responsible for payroll, HR or hiring. Participating businesses employed between five and 1,000 people, a range that does not line up perfectly with every official Canadian definition of a small or medium-sized enterprise. The 66% hiring figure also combines two different intentions: 34% expect to expand hiring, while 32% expect to hire selectively.

Even with those caveats, the result matters because smaller firms carry enormous weight in Canada’s labour market. Innovation, Science and Economic Development Canada reports that small businesses employed 5.8 million people in 2024, equal to 46.6% of the private-sector labour force. When firms of that scale simultaneously put more money into people and AI, the important question is not whether technology “wins” over labour. It is whether businesses can turn both investments into higher output, better service and sustainable growth without adding unnecessary cost or risk.

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