Nearly half of Canadian businesses now use generative AI in their operations, yet the same businesses are spending more than ever on employee training. The Canadian Federation of Independent Business (CFIB) reports that 78% of businesses plan to maintain or increase training spending in 2026, with training dominating investment plans over automation or new technology. For small and medium-sized enterprises (SMEs), which make up 98% of all Canadian businesses and employ roughly 8 million people, this creates a real tension: how to keep up with rising costs while still building the workforce you need.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
These numbers point to a pattern that’s hard to ignore. Canadian firms, especially smaller ones, are carrying a heavy training load without much formal structure to manage it. The cost adds up fast, and the pressure to train people while also recruiting and retaining them creates a cycle that’s tough to break. Here’s what you actually need to know.
What informal training really means for your bottom line
When most people hear “training,” they picture a classroom or an online course. But for Canadian SMEs, the reality is different. The CFIB found that 91% of small and medium-sized businesses rely on informal, on-the-job training. Only 3% use formal training exclusively. The smaller the business, the more it leans on informal methods — meaning a senior employee showing a new hire how to do the job, often while doing their own work at the same time.
That approach has a real cost. The CFIB estimates that SMEs spend about $610.40 per year on informal training for one new employee with no professional experience. Half of small businesses put in at least 40 hours per year per inexperienced new hire. Across the country, that adds up to an estimated $657.8 million annually. What I tend to notice is that many owners don’t track this cost at all — it just gets absorbed into someone’s working day, and nobody counts the hours.
This matters because training costs are rising alongside other pressures. If you’re running a business with 20 to 49 employees, you’re also more likely to be investing in AI — 62% of firms that size are — and those same firms are 5.4 percentage points more likely to invest in training. The two investments pull in the same direction, but they also pull on the same budget.
What happens when training costs go unmanaged
The financial exposure from unmanaged training expenses is bigger than most owners realise. The CFIB’s $657.8 million figure covers only informal training for entry-level staff. It doesn’t include formal courses, certifications, or the time senior staff lose while training others. For a business with 10 employees, even a modest training load can eat up thousands of dollars a year in lost productivity.
Then there’s the recruitment side. Statistics Canada reports that 28.3% of businesses expect recruiting skilled employees to be their top labour obstacle over the next three months. Another 19.3% expect trouble retaining skilled staff. When you train someone and they leave, you lose not just the employee but the time and money you put into them. Larger businesses feel this more acutely — 57.2% of firms with 20–99 employees expect at least one labour-related obstacle, compared to a quarter of micro-businesses.
The scenario that catches many owners off guard is the compounding effect. Train a new hire for 40 hours, they leave after six months, and you train the next person for another 40 hours. That’s 80 hours of lost productivity for one role in a year, plus the $610.40 per hire. Over three or four departures, the cost becomes significant — and it’s almost never budgeted for.
Three common training cost mistakes Canadian businesses make
Treating all training as informal by default
The CFIB data shows that 36% of SMEs rely exclusively on informal training. That works when you have experienced staff who can teach, but it falls apart when those staff are already stretched. The cost of informal training is hidden in plain sight — it’s the hours your best employee spends showing someone the ropes instead of doing their own job. One fix is to set a simple time budget: decide how many hours per month a senior employee can spend on training, and track it. If it exceeds that, consider whether a structured option would be cheaper in the long run.
Ignoring the link between AI investment and training needs
Businesses that invest in AI are more likely to invest in training, but many treat them as separate line items. The CFIB found that 47% of businesses are investing in AI, yet only 61% plan to maintain or increase spending on non-AI technology. If you bring in AI tools without training staff to use them properly, you waste the investment. A practical step is to bundle AI adoption with a specific training plan — even if it’s informal — before you buy the software. Tools like MagicFit can help with AI-driven content creation, but only if your team knows how to use it.
Underestimating the cost of turnover on training
With 19.3% of businesses expecting retention problems, the training cost per departed employee is rarely calculated. If you spend $610.40 training a new hire and they leave within a year, that’s a direct loss. Multiply it by the number of entry-level roles you fill annually, and the figure can be substantial. One way to address this is to build a simple spreadsheet that tracks training hours per employee and compares it to retention rates. If you see a pattern, it’s worth looking at whether more structured training — or better working conditions — would reduce turnover.
How to manage training costs without cutting quality
The research makes one thing clear: training spending isn’t going down. The question is how to spend it better. Here’s what the data suggests about structuring your approach.
Track informal training time and cost
Most SMEs don’t measure informal training, so they can’t manage it. Start by logging how many hours senior staff spend training new hires over a month. Multiply by their hourly rate, and you’ll have a baseline cost. The CFIB’s $610.40 figure is a useful benchmark — if your cost is significantly higher, it’s worth asking why. For businesses with 20 or more employees, this kind of tracking becomes even more important, since larger firms face higher labour obstacles and more complex training needs.
Match training method to employee experience level
The CFIB found that half of small businesses spend at least 40 hours per year training each new employee with no prior work experience. That’s a big time investment. For experienced hires, informal on-the-job training might be enough. For complete beginners, consider mixing informal training with a short structured module — even a half-day session on core processes can cut the informal training time significantly. The key is to match the method to the person, not default to one approach for everyone.
Use technology to reduce repetitive training tasks
If you’re training multiple people on the same process, a recorded video or written guide can save hours. This is where AI tools can help, but only if they’re set up properly. For example, using a platform like Shopify for ecommerce training means new staff can learn the system at their own pace rather than taking up a manager’s time. The same logic applies to any repeatable task — document it once, and the training cost drops for every subsequent hire.
Plan for the future: AI and training are converging
The CFIB data shows that AI adoption increases with firm size, from 39% among businesses with fewer than five employees to over 60% among those with 20–49 employees. As more businesses adopt AI, the need for training will shift — not away from people skills, but toward digital literacy. Nearly 8 in 10 businesses plan to maintain or increase training spending in 2026, and training dominates investment plans over automation or non-AI tech. That suggests the smart move is to start building a training budget now, even if it’s small, rather than reacting when costs spike.
For businesses that need help navigating the legal or compliance side of training contracts, employee agreements, or intellectual property around training materials, services like JustAnswer Business Law can provide guidance without the cost of a full legal retainer.
Frequently asked questions about training costs for Canadian businesses
Do I have to pay employees for informal training time? ▾
Can I claim training costs as a business expense? ▾
What’s the difference between informal and formal training for tax purposes? ▾
How do I calculate the true cost of training a new employee? ▾
Are there government programs that help with training costs? ▾
Does training investment really help with employee retention? ▾
Training costs are rising — the question is how you manage them
The CFIB data is clear: training spending is the top investment priority for Canadian businesses in 2026, and it’s not going to drop. The businesses that handle this well will be the ones that track their costs, match training methods to employee experience, and use technology to reduce repetitive work. The ones that don’t will keep absorbing hidden costs that eat into margins and productivity.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Understanding How Exchange Rate Fluctuations Impact Canadian Businesses.
Sources and Further Reading
Meeting Sustainability Expectations in Canada — Explores how Canadian businesses are adapting to changing consumer demands alongside rising operational costs.
The Impact of Import Dependency on Canada’s Economy — Looks at how supply chain pressures affect training budgets and workforce planning.
Canadian Federation of Independent Business (2025). AI adoption and training investment are linked. 🔗
Canadian Federation of Independent Business (2025). Canada’s Training Ground: How Small Businesses Are Building Tomorrow’s Workforce. 🔗
Statistics Canada (2024). Labour challenges and training-related obstacles. 🔗
