A Penny Saved is a Penny Earned?

Effective February 4, 2013, the Canadian government proceeded with its plan to phase out the penny. In light of rising production and handling costs relative to the coin’s face value, the Royal Canadian Mint has now ceased production of the penny, and businesses, including retailers, are being encouraged to stop using pennies in their cash transactions. Cheque, payment by gift cards and pre-paid credits cards and electronic transfers of funds are not affected.

While the penny is still legal tender – retailers are still permitted to accept and distribute pennies as a method of payment in their cash transactions, if they choose to do so – the government has asked that retailers begin rounding the final amount in cash transactions in a fair, consistent and transparent manner.

Although retailers are permitted to adopt their own rounding guidelines, the federal government and its agencies have now adopted a symmetrical rounding process for all cash transactions with the public. The guideline provides for rounding as follows:

  • amounts ending in ¢1 and ¢2 are rounded down to the nearest ¢10;
  • amounts ending in ¢3 and ¢4 are rounded up to the nearest ¢5;
  • amounts ending in ¢6 and ¢7 are rounded down to the nearest ¢5;
  • amounts ending in ¢8 and ¢9 are rounded up to the nearest ¢10; and
  • amounts ending in ¢0 and ¢5 remain unchanged.

As the obligation with respect to rounding is to do so in a fair, consistent and transparent manner, retailers may adopt a rounding process of their choosing, provided that they apply it consistently. For example, some retailers may decide to round down all transactions, others might round down final amounts below five cents and round up final amounts above five cents and others still might choose to adopt the federal guidelines. The method adopted, however, ultimately remains the choice of the retailer.

Why Adopt the Rounding Process?

Individuals and retailers alike are being encouraged to deposit pennies at their financial institutions. As the Royal Canadian Mint is no longer producing pennies, and financial institutions may choose not to distribute them to customers, the supply of pennies may soon dwindle. Retailers may therefore choose to adopt their own rounding methods in order to exercise greater control over how the phasing out process impacts their day-to-day activities.

When to Round:

The rounding process applies to final amounts in cash transactions only, meaning that retailers should continue to tally the exact amount of individual items (including duties, fees or taxes) prior to rounding on the final cost. Similarly, refunds in cash amounts can also have the rounding process applied to them; this approach will become increasingly necessary as the supply of pennies declines.

Steps to Consider:

In an effort to be fair, consistent and transparent, retailers who adopt a rounding method may wish to inform the public of their policies. The government has prepared a bilingual information document that retailers may choose to post in a conspicuous location, such as at a point of sale. A copy of the information notice is available at the following address: http://www.fin.gc.ca/1cent/B-Notice-Avis-e.pdf. This may also assist frontline staff who engage with the public and who may be asked about the phasing out process.

While a number of large retailers have indicated that they will be updating their cash registers and point-of-sale equipment, others have indicated that staff will be trained in the phasing out policies adopted and will simply do the "mental math" to carry out such processes on their own. We would be pleased to assist you in determining the best approach for your business.

In addition to the foregoing informational overview, we will continue to monitor developments and provide comment on their impact on Canadian retailers. We would be pleased to discuss and provide additional guidance regarding the phasing out of the penny and its impact on your business.