Why was this provision in the first place. It sounds like something that was negotiated in lieu of extra pay. If that is so, the government is acting illegally and breaching contracts.
You're right. My understanding of what's going on is that the government is just changing the terms of severance pay. These things are written into the collective agreements for each occupational group, they're pretty standardized in the agreeements I've seen, and have been in place since at least 1969. They cover three circumstances: resignation, retirement, and layoff. Getting fired is dealt with separately from severance. On resignation, you get nothing except the pay you're entitled to up to your last day at work and a payout for whatever unused vacation time you have. If you retire, you get a week's pay for every complete year of service as a severance payment, plus whatever vacation pay you're owed. If you're laid off, a different set of rules kicks in, described in what's called the Work Force Adjustment Directive. It's a large and complex document, but the main provision is that on lay off you get a year's pay. There are also provisions for education leave and assistance, job swapping, stuff like that. If you're lucky enough to be able to retire when they lay you off, and there are all sorts of complex conditions on that, about your age and years of service and other bumph, you get both the retirement severance and the layoff severance. Plus your pension of course, which really isn't as rich as people think. According to a piece in the Globe & Mail last week, the average pension paid to retired federal public servants is around $22K a year. Not exactly gold plated for most of them, you get the gold plated one only if you have 30 or more years of continuous service and retire after age 55 from a fairly senior position.
What the government's doing now, if I've understood the news reports correctly, is cancelling that retirement severance of a week's pay for every year of service, paying it out to those currently employed--that's the $6 billion--and not giving it to new hires in future. But because it's written into all the collective agreements, yes they would seem to be breaching contracts.