The University of Waterloo will see the largest exodus of staff in Canadian university history as 340 employees - nearly one eighth of its workforce - accept early retirement to help offset provincial funding cuts.

With the largest faculty of environmental studies in Canada and one of the pioneers in computer sciences, the 22,000-student university 100 kilometres west of Toronto will have 140 fewer academics by the autumn. One department will lose almost half its teachers.

The university is trying to put a positive spin on the story, saying this type of change, which will see nine senior administrators leave, would normally have taken a decade to accomplish. "It will allow the university to rebuild," said spokesman Jim Fox. Some staff will be back for sessional and transitional work. Other new appointments will have to be given special approval.

But the university considers the early retirement packages the least painful option compared to laying off staff or continuing a three-year salary freeze.

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The university says this is not the final solution to its financial problems. It still expects a shortfall of Can$12 million (Pounds 5.5 million) even with an expected 20 per cent tuition increase this autumn.

Waterloo's administration had believed the campaign promises about funding made by the new government. So when Ontario's finance minister announced a 15 per cent reduction (Can$400 million) in all operating grants last November, the college was left high and dry. The next day 590 of its 2,300 full-time staff were given the early retirement offer.

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While other universities across Canada have been experiencing financial hardship - such as the Universite de Montreal, which plans to lay off 190 professors in two years along with 21 per cent of its non-academic staff, or universities in Alberta that have had three years to deal with a 20 per cent reduction - James Downey, president of Montreal, says Ontario's one-year implementation has meant a "very severe, very abrupt" ride.

"Ontario is suffering more than any other jurisdiction," he said.

While Waterloo capitalised on a surplus in its pension fund to offer a more attractive package, including benefit coverage and a signing bonus of six months' salary, smaller institutions like Bellville's Loyalist College just outside Ottawa have had to employ more creative methods. The community college, which faces a Can$3 million reduction in its 1995/96 funding, is to close the school for a week during the non-academic year to raise funds for early retirement packages.

Other community colleges are cutting whole programmes or amalgamating with neighbouring colleges.

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And since government is continuing to contribute less to post-secondary education, many institutions are trying to become more market-oriented, according to Tom Norton, executive director of the Association of Community Colleges of Canada.