Small and medium-sized enterprises (SMEs), which typically employ fewer than 500 employees, are the backbone of the Canadian economy, accounting for more than 90% of jobs in the private sector. Yet they face critical labour shortages and skill gaps that threaten their competitiveness—both with larger organizations and other businesses globally.

For many years, and across the country, SMEs have identified talent shortages. Surveys by various organizations repeatedly show SMEs reporting access to talent as a critical competitive issue. At the same time, there is limited data on the specific skills needed which vary across sectors and regions of the country.

There is also evidence that SMEs face challenges in the processes that they employ to hire, retain and train talent. They often lack the HR professionals and resources needed to support recruitment of highly skilled workers or for training, retraining and upskilling existing employees. Some research also suggests they face challenges in retaining talent. In addition, there is evidence that SMEs often present more barriers to women and diverse employees in part because of their heavy dependence on informal processes for recruitment. SMEs are ill-equipped to comply with growing regulatory requirement such as Bill C-25, An Act to amend the Canada Business Corporations Act, the Canada Cooperatives Act, the Canada Not-for-profit Corporations Act, and the Competition Act, which requires additional reporting regarding diversity on boards and in leadership roles as well as strategies to improve representation.

Finally, SMEs have been hardest hit by the COVID-19 crisis, especially smaller businesses and those in the services sectors. While some are cautiously optimistic about recovery, the impact this crisis will have on skills and employment is not at all clear.

This report explores the current knowledge concerning approaches to skills among Canadian SMEs as well as areas for further research.

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