Member update: Temporary Foreign Worker policy approach from the federal government

The federal government has unveiled an updated immigration and Temporary Foreign Worker (TFW) strategy as part of its ongoing target to reduce the share of temporary residents to under 5per cent of Canada’s total population by the end of 2027. While these reforms impose stricter caps on low-wage TFW streams in metropolitan areas, they also provide specific rural exemptions and announce a one-time In-Canada Workers Initiative (Temporary Resident (TR) to Permanent Resident (PR) pathway) for 33,000 workers.

Key policy approaches by the federal government

• Stricter limits on low-wage TFWs: The government has reduced the allowable share of low-wage TFWs for most employers from 20per cent to 10per cent, though rural employers can retain 15per cent through March 31, 2027.
• TR-to-PR pathway (In-Canada Workers Initiative): A targeted one-time measure to transition at least 20,000 temporary residents to permanent residents in 2026 and the remaining 13,000 in 2027, prioritizing in-demand sectors and workers with established roots in Canada.
• It is important to note this only applies to TRs who are currently in Canada who applied through:
  • Provincial Nominee Program;
  • Atlantic Immigration Program;
  • Community immigration pilots;
  • Caregiver pilots;
  • Agri­Food Pilot; and
  • Have been living in smaller communities in Canada for 2 years or more.
• Applicants do not need to take any action because they have been identified through occupation driven pilots and well-established regional immigration programs, with IRCC saying 3,600 workers have already been granted permanent residency this year through this program before it was announced.
• Two-step immigration alignment: Continued preference for identifying and integrating temporary workers already residing and working in Canada rather than relying entirely on overseas applications.

Important note on rural exemptions: Effective April 1, 2026, rural employers in eligible regions may temporarily hire up to 15per cent of their workforce through the low-wage TFW Program. However, applications are subject to strict Labour Market Impact Assessment (LMIA) requirements and a maximum employment duration of one year.

Note for AIA Canada members

The Canadian auto care sector faces persistent structural shortages of skilled labour, including automotive service technicians and parts specialists. The updated guidelines impact our members in the following ways:

• High-skilled TFWs: High-skilled streams remain largely exempt from low-wage caps, but processing times and LMIA scrutiny continue to present administrative challenges for international recruitment.
• Retention and PR pathways: The 33,000 TR-to-PR fast-track mechanism offers an important opportunity to retain foreign workers who have been with Canadian auto shops for over 18 months, converting them to permanent workers.
• Regional disparities: Urban auto shops may find it harder to hire workers under low-wage TFW streams due to a reduced 10per cent cap, while rural shops can leverage the temporary 15per cent cap.

Suggested actions

• Review your current roster of foreign workers and determine their eligibility for the one-time TR-to-PR pathway, based on the program through which they applied to work in Canada and the duration of their stay so far.
• If operating in a qualifying rural area, consider filing LMIA requests utilizing the 15 per cent cap rule before the provision expires in March 2027.
• Keep up-to-date with provincial employer registration rules and ensure that domestic advertising efforts continue for at least 8 weeks prior to submitting an LMIA.

Please reach out to AIA Canada’s Vice President, Government Relations, Emily Holtby with any questions: emily.holtby@aiacanada.com