OTTAWA—The Canadian government announced sweeping plans to make it harder for companies to hire temporary workers from abroad, in a move that businesses in the country's resource-rich west have said will curb their ability to grow.

The Canadian public has often criticized the popular temporary foreign worker program as a way for companies to replace locals with cheap foreign labor, something the Canadian government has sought to address at a time when it has also been overhauling an immigration system long seen as a global...