Companies respond to AI progress by shrinking workforces

A wave of layoffs and hiring freezes are sweeping through major corporations in North America, as companies increasingly bet that artificial intelligence (AI) and automation will allow them to grow without expanding their workforces.

Toronto-Dominion (TD) Bank recently announced a two per cent reduction in its workforce, with job losses spanning direct investing, risk management, and corporate functions. The move is part of a restructuring program aimed at streamlining operations and building a “simpler and faster” organization, while continuing to invest in digital and AI-driven solutions. Similarly, the Bank of Nova Scotia (Scotiabank) is cutting jobs in its Canadian banking division to strengthen long-term profitability. These actions reflect a growing recognition among Canadian employers that AI and automation are fundamentally altering workforce requirements. Air Canada has also laid off middle managers in a bid to streamline is business.

The implications for HR executives are significant, from handling layoffs, communication, and keeping staff aligned with the business goals through an unsettling period of change.  The Canadian experience is part of a broader North American trend, with U.S. giants like Amazon and Target implementing historic workforce reductions and hiring freezes. Amazon, for instance, is poised to cut up to 30,000 corporate positions, while Target is eliminating about eight per cent of its corporate workforce. Shipping giant UPS was the latest to announce major layoffs this week, cutting nearly 48,000 positions across its global operations in one of the largest workforce reductions in its 117-year history. Other major employers, such as JPMorgan Chase and Walmart, are maintaining flat headcounts despite anticipated sales growth, betting that AI and automation will deliver productivity gains without the need for additional staff, according to a report in the Wall Street Journal.

The rationale behind these decisions is clear: as AI and automation become more deeply embedded in business operations, executives expect to maintain or even increase productivity with fewer employees. This has led not only to layoffs but also to a reluctance to fill vacant roles, particularly in areas such as finance, legal, and customer support.

For HR executives, the implications are significant:

• Strategic Workforce Planning:
  HR leaders must assess which roles are most vulnerable to automation and which can be augmented by AI. Developing internal job classifications to distinguish “AI-competing” from “AI-augmenting” roles will be critical for planning and targeted training.
• Change Management and Communication:
  Transparent communication is essential. HR executives should clearly explain the business rationale for workforce changes, provide timely and honest information to affected employees, and support remaining staff by outlining how AI will impact their roles and the organization’s future direction.
• Legal and Ethical Considerations:
  Ensuring compliance with employment standards, notice periods, and union agreements is paramount. Consulting legal counsel can help avoid wrongful dismissal claims and ensure that all actions are taken ethically and lawfully.
• Employee Support and Brand Protection:
  Providing severance, outplacement services, and access to mental health resources helps protect the employer brand and supports employees through transition. Investing in reskilling and upskilling opportunities is also vital, enabling employees to transition into new roles aligned with evolving business needs.
• Building Future-Ready Talent:
  As noted by The Conference Board of Canada, the more employees can use AI to strengthen their work, the more future-proof their jobs will be. HR executives should champion programs that teach not just the operation of AI tools, but also thoughtful, human-centric use of technology.

While some employees are eager to embrace AI, many are anxious about job security and the skills required to succeed in an AI-driven workplace. HR executives are uniquely positioned to address these concerns, foster resilience, and help organizations adapt to a rapidly changing environment.

Erin Gordon, Vice President of Human Resources at Lindt & Sprungli Canada, previously told HRD Can that AI and trying to understand how we use it to benefit the business is consuming companies’ attention.

“It’s not a static situation,” she said. “It’s constantly evolving. The challenge and opportunity with the speed at which AI evolves means there’s always something new. It’s continually getting better, but then on the other side of that, it makes it difficult to try and bring your teams up to speed like you would in a traditional way.”