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Wagepoint has published new data showing Gen Z now makes up 38% of the workforce at Canadian small businesses, reflecting a marked shift in hiring patterns since 2019.
The payroll software company's 2026 Canadian Small Business Workforce Report also found that employee separations fell over the same period, despite the sharp rise in younger workers' share of employment. Annual separations dropped from 38% in 2019 to 27% in 2025, while average headcount per business rose 44%, from 13.3 to 19.1 employees.
The dataset covers aggregated, de-identified payroll records from about 6,800 Canadian small and mid-sized businesses and roughly 106,000 employees. It compares payroll trends between 2019 and 2025, focusing on actual hiring, departures and pay rather than survey responses.
Overall, the report depicts a small business labour market that has grown larger and younger while showing lower churn. Millennials remained the biggest cohort at 41% of the workforce in 2025, but their share fell from 55% in 2019. Together, Millennials and Gen Z accounted for 79% of small business workers.
The findings challenge a common employer assumption that a younger workforce brings higher turnover. Instead, the data suggests small employers retained workers for longer even as Gen Z's share more than doubled from 18% to 38%.
Pay trends
The report also points to diverging wage growth between hourly and salaried staff. Median hourly pay rose 27% to CAD $26.70 from CAD $20.97, compared with roughly 20% inflation over the period, while median full-time salaries increased by about 14%.
At the same time, the mix of work shifted towards more full-time jobs. Part-time roles fell from 79% of headcount in 2019 to 69% in 2025, suggesting staffing needs changed as businesses expanded their teams.
Average team growth and stronger hourly pay may point to resilience among smaller employers. But the gap between hourly wage growth and salary growth also suggests different cost pressures across their workforces. Owners managing a mix of front-line hourly staff and full-time salaried employees may be facing uneven compensation expectations.
Regional figures show workforce changes were not evenly distributed across the country. Western Canada recorded the largest increase in average headcount, rising 53% from 11.8 to 18.0 employees, and posted the highest median hourly pay at CAD $27.58.
Central Canada had the largest businesses on average, with 20.0 employees in 2025, up from 14.5 in 2019. The region's separation rate declined from 39% to 26%.
In Atlantic Canada, Gen Z's share of the workforce climbed from 14% to 37%, the largest increase among the three regions tracked in the report. Median hourly pay in the region rose 33% from CAD $18.95 to CAD $25.19.
Labour shift
The data matters because small businesses often absorb workforce changes early, particularly among younger staff entering employment. They also operate with fewer layers of management and less room to absorb abrupt swings in labour costs, making payroll records a useful marker of broader shifts in employment conditions.
For advisers such as accountants and bookkeepers, the figures may also signal a growing need for support with hiring, classification, pay structures and retention. As teams become larger and more full-time, payroll becomes a more central operational function rather than a narrow administrative task.
Ben Richmond, Chief Executive Officer at Wagepoint, said payroll records provide a direct view of those changes.
"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," Richmond said.
He added: "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."