Excuse me?
Yup, you’ve read that right.
Very soon, gig or platform workers who are below 30 years old will be required to make contributions to their Central Provident Fund (CPF), the national savings scheme for retirement.
Currently, only salaried employees are making a contribution rate of 20% to their CPF account every month.
TL;DR: When Do You Need to Contribute And How Much to Contribute?
Click here to jump:
- Who’s considered a gig or platform worker?
- How much do platform workers and companies need to contribute?
- New work injury protection for platform workers
Gig or Platform Workers in Singapore
By definition, platform workers refer to food delivery riders and private-hire car drivers providing ride-hailing services.
There are currently 73,200 platform workers in Singapore.
This move will affect those who are below 30 years old, while those who are older may voluntarily opt-in to contribute.
However, there will be no opting out once older workers have decided to make their contributions.
Why Push For This Move Now?
It’s no secret that housing is becoming increasingly expensive in Singapore, and with ongoing inflation, there has been a camp of younger workers who felt that by making a mandatory CPF contribution, they would be able to use their CPF Ordinary Account (OA) to pay for housing.
Similarly, there are those who want to benefit from the compounding effect of CPF interest rates, which are comparable to lower-risk investment assets such as Singapore Savings Bonds and Fixed Deposits.
The recommendation was made by the Advisory Committee on Platform Workers (ACPW), which was convened in September 2021 to look into strengthening protections for platform workers.
In its 58-page report, there were 12 recommendations that were accepted by the Government.
How Much CPF Contributions Do Workers And Companies Need to Make?
Hirers will be expected to provide CPF contributions at the same rates as employers.
This would mean that these hirers should be in a position where they are able to assign jobs to the workers and take a revenue cut from them.
The contributions to CPF will be increased in phases over a period of five years, with an average of 2.5% yearly increments for gig workers, and 3.5% for companies.
Gradually, the rates will hit the prevailing CPF contribution rates of 20% of wages for workers and 17% for companies.
The CPF contribution rates are also applied to gross income after deducting workers’ expenses, such as fuel and vehicle maintenance.
For instance, drivers of cabs and private hire cars may opt to adopt a fixed expense deduction ratio of 60%.
This would imply that the CPF contribution rate only applies to 40% of their gross income, and the average additional annual CPF contribution for these drivers and their employers will be 1% of gross income and 1.4% for their companies.
But eventually, the CPF contributions of platform workers and platform companies will be aligned with employees and employers respectively.
When Do You Need to Start Contributing?
The new policy will be implemented gradually from the latter half of 2024 at the earliest.
If the ruling is to begin in January 2025, any worker born in 1995 or later must have CPF contributions, regardless of the age when they began work for the platform.
For example, a 31-year-old in 2027 would have been born in 1996 and it will still be mandatory for him or her to contribute to CPF.
What Does This Mean For Workers?
Well, this would mean a drop in your take-home pay.
If your income is unstable from month to month, especially for food delivery riders, this could potentially be a challenge.
This will also mean you will need to adjust how much you set aside to save, spend and invest.
Read more:
- Treasury Bills (T-Bills) Singapore Nov 2022 Guide: Latest T-Bills Interest Rate & How To Buy T-Bills in Singapore
- Low-Risk Investments in Singapore to Grow Your Money
- Singapore Savings Bonds Interest Rate Guide: How Is the Interest Rate for the Singapore Savings Bond (SSB) Determined?
Work Injury Protection For Platform Workers
Platform workers have thus far been classified as Self-Employed Persons and are mostly not compensated for work-related injuries.
In the set of recommendations, the association proposed for companies provide compensation of the same scope and level under the Work Injury Compensation Act (WICA).
Similarly, companies are to compensate platform workers who are working at the point of injury, based on the worker’s total earnings from the platform sector in which the injury was sustained.
Afterthoughts
While the move serves to encourage workers to contribute to their retirement, opinions remain divided.
Perhaps, if there’s flexibility in allowing workers to contribute a minimum sum (for example, $100) per month, workers might be more willing to contribute when they are able to.
Similarly, we can’t ignore the lower-income families whose immediate needs have to be met with cash.
Besides Goods and Services Tax (GST) vouchers and support packages, greater support will be required to push them to contribute as well.
What are your thoughts?
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