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151223_ Platform Workers Personal Finance 101 Guide

Platform Workers Personal Finance 101 Guide

profileHui Juan Neo

Thanks to COVID-19, more people are now doing gig work and considered self-employed: Platform workers.

By definition, platform workers refer to food delivery riders and private-hire car drivers providing ride-hailing services, and there are currently 38,100 serving as private-hire car drivers, 25,400 assuming the role of taxi drivers, and 25,500 engaged in delivery services.

Besides these groups, freelance office workers, service/food & beverage workers, and digital services workers are also considered platform workers.

So, the government dropped a bombshell in November 2022: if you’re a platform worker under 30, you’ve got to put money into your Central Provident Fund (CPF) from late 2024. While the older folks can opt in, they can’t choose to opt out once committed.

Source: Giphy

But there’s a silver lining. Lower-income platform workers who are earning up to $2,500 per month will also receive up to 75 per cent funding for their CPF contributions, while those who earn between $50 and $500 a month will also be able to receive CPF contributions from the platform companies without having to make CPF contributions on their own.

And here’s the catch – unlike regular employees, platform workers have to handle their CPF and might not get the best insurance deals for their jobs.

So, how exactly should platform workers manage their finances starting in 2024? Let’s spill the tea.

TL;DR: Platform Workers Personal Finance 101 Guide

This guide is inspired by the publication of the ‘Financial Freedom of Platform Workers and the Self-Employed’ study commissioned by Singlife, alongside PwC and the Singapore Fintech Association.

The study aimed to gain insights into platform workers’ motivations for remaining in this industry, the challenges they confront, and the effects on financial independence. The comprehensive survey delved into the unique financial challenges faced by platform workers in Singapore, underscoring the immediate stressors, saving dilemmas, retirement aspirations, and the insurance protection gap experienced by these workers.

You can find the study here, and using it as a reference, we’ve developed a 101 guide to help all platform workers better manage their personal finances!

There are the steps to overcome the challenges faced by platform workers:

  1. Create a budget
  2. Put aside emergency funds
  3. Prioritise high-interest debt
  4. Start investing
  5. Get your insurance
  6. Shop smart
  7. Stay mindful of taxes
  8. Apply for relevant government assistance

For in-depth reading, click here to jump:

Disclaimer: This is a non-sponsored article. Any opinions stated in this article are of the writer only and do not represent Seedly.

What Are Platform Workers?

Based on the study, platform workers belong to the following groups: Delivery workers, private hire car drivers/taxi drivers, freelance office workers, freelance service/food & beverage workers, and freelance digital services workers.

They are considered self-employed and do not share the same type of benefits as a general employee in a company.

Average Earnings of Platform Workers

Just based on the study, four in five (4 in 5) platform workers earn a monthly personal income of $4,000 and lower, even though 48% of the platform workers clock in more than 40 hours per week, and this does not account for rental and petrol costs that delivery workers and private hire/taxi drivers have to pay for.

Advisory Committee on Platform Workers Recommendations & Upcoming Changes

I’m not going to bore you with all the policy details; this is a summary of the changes you need to be aware of as a platform worker.

From the second half of 2024:

  1. Platform workers and companies will need to start contributing CPF to platforms, and the contribution rates will be increased in phases over 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.
  2. Platform companies are also now required to provide the same level of work injury compensation as required by the Work Injury Compensation Act (WICA) of Singapore.
  3. To facilitate the transition to compulsory CPF contribution by platform workers, those earning up to $2,500 per month and who increase their CPF contributions will be eligible for up to 75 per cent funding of the additional contributions so that these workers can transit smoothly. Essentially, the funding will be reduced to 50 per cent of the increase in the second and third years and 25 per cent in the fourth year, which is the last year of this transition support.

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Concerns and Challenges of Platform Workers and Companies

When the recommendations were first announced, we asked ourselves if these would benefit our delivery partners meaningfully, specifically in helping them ensure retirement adequacy. While we agreed that they would, we believe that the opinion on whether our delivery partners want mandatory CPF is still quite split.”
~ Foodpanda

The proposed changes are welcome for both the platform workers and companies, but they are not without challenges:

1. Lesser Take-Home Pay Amidst Rising Costs

Source: SingLife

One significant financial stressor for platform workers is the challenge of coping with the escalating costs of daily living, particularly given their fluctuating income.

According to the survey, 62% of platform workers identified the increasing costs of daily expenses as their primary financial worry. This concern is substantiated by a considerable portion of their financial outlay being allocated to essential household needs.

In addition to the burden of rising daily expenses, platform workers also grapple with the strain of irregular income. Earlier, we noted that four out of five platform workers earn a monthly income of $4,000 or lower, despite 48% of them working more than 40 hours per week. This dual challenge of managing daily expenses and dealing with income irregularities compounds the financial pressure these workers face.

2. Lack of Savings and Emergency Funds

Lesser take-home pay also has a compounding effect on the amount of savings platform workers can put aside.

Within the platform worker community, merely 12% possess ample savings or emergency funds for unforeseen circumstances, and only 19% successfully achieve their monthly savings targets post-bill payments. Remarkably, among those working over 60 hours weekly, almost half (49%) cannot set aside savings after covering their monthly expenses.

This challenge may stem from hidden costs associated with platform work, such as ride-hailing drivers who must factor in expenses like car rental and the escalating cost of petrol.

3. Insurance Protection Coverage Gaps

In Singapore, the Work Injury Compensation Act (WICA) covers employees for injuries and occupational diseases that happen to employees at work or as a result of work. However, as platform workers are not officially recognised as employees by platform companies, the WICA do not apply to them.

While many platform companies offer personal accident coverage and cash payouts for hospitalisation, these provisions lack mandatory standardisation within the industry and may be restricted for platform workers.

4. Possible Increase in Cost of Operation And Reducing Appeal of Platform Work

Firstly, if platform companies are forced to pay an additional 17% for employers’ contributions, this might increase the overall cost of operation. As with most economies, companies would likely pass on these extra costs to customers, who could pay more for services.

The impact of this is that it could lead to fewer people using these platforms, which means less work and less money for those who rely on these jobs.

There’s also a worry about platform workers having to contribute 20% of their earnings, as many of these workers need all their money for immediate needs like rent and food. If they have to set aside 20% for CPF, it could be even harder for them.

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Personal Finance Tips for Platform Workers

We’re living in a messy world where prices are rising rapidly, and we definitely should try not to live on the paycheck because if not, would we ever have enough for our later years?

There are challenges ahead, but you must adapt if you want to continue your line of work as a platform worker in Singapore.

1. Create a Budget

We’ve emphasised this in the Seedly Money Framework, and we can’t stress enough how important it is to have a budget and stick to it.

What you need to do that’s within your means:

  • Track your income and expenses
  • Categorise spending to identify areas for savings
  • Set realistic budget goals and stick to them.

2. Put Aside Emergency Funds

The trick here is to set up a monthly recurring standing statement using your bank account:

  • Start building a fund for unforeseen expenses, regardless of how small you start from
  • Aim for three to six months’ worth of living expenses
  • Prioritise consistent contributions to the fund.

3. Prioritise High-interest Debt

4. Start Investing

Do you know that you can start investing even when you don’t have a high capital to start with?

Some robo-advisors do not require any minimum amount, and if you’re risk averse, there are low-risk investment options such as fixed deposits, Singapore Savings Bonds, and Treasury Bills that you can tap on.

What you need to do is to:

  • Understand basic investment principles
  • Diversify investments to manage risk
  • Begin investing early for long-term gains.

Check out our 101 Guide For Beginner Investors.

5. Get Your Insurance

Earlier, we mentioned that coverage by platform companies is not standardised, and currently, there are protection gaps.

More often than not, riders and drivers are only covered when they have an in-force and valid agreement to complete deliveries on behalf of the platform they are working for. For example, a delivery platform worker who moves from a less busy area to a more active one to complete a delivery. Subsequently, he/she might need to navigate to a busier location to enhance their prospects of securing the next job.

Unfortunately, any accident or injury sustained during this journey to find additional jobs is presently not encompassed by the existing schemes offered by the platform company.

Unless you’re fully covered by platform companies, you should get yourself health insurance and a personal accident plan.

A good headstart would be Singlife Shield Starter:

Singlife Shield Starter with Health Plus Starter is an affordable Integrated Shield Plan (IP) and rider bundle that complements your basic medical coverage. Created for budget-conscious under 40-year-olds, it protects you against unexpected hospital bills and minimises your out-of-pocket expenses. It is an affordable medical insurance plan with add-ons to protect you against unexpected hospital bills.

Singlife Shield Starter provides basic coverage of up to $20,000 per policy year, eligible across a network of 500 medical providers and private hospitals. For more coverage, add on the rider, Singlife Health Plus Starter, at just $1 and your co-payment will be reduced to just 5%!

All Singaporeans and Permanent Residents have MediShield Life coverage, which the government provides, but it doesn’t pay your full medical bill. Singlife Shield Starter and Health Plus Starter give you greater coverage and reduce out-of-pocket expenses.

Singlife Shield Starter Promotion: GST Waiver

For a limited time only, enjoy a waiver of the prevailing Goods and Services Tax (GST) for your Singlife Shield Starter and Health Plus Starter first-year premium!

Apply Now

If you’re looking for some personal accident coverage, check out our personal accident insurance comparison:

6. Shop Smart

Pro-tip: Seedly Reviews is the place for price comparison and reviews

7. Stay Mindful of Taxes

We know that contributing to CPF voluntarily to your Ordinary Account (OA) and Special Account (SA) can be a bummer at times. But it’s not without its merits.

Stay ahead of the various schemes that you can apply for so that you can maximise all the tax reliefs:

But, do note that your tax relief for your MediSave and voluntary CPF contributions will be capped at the lowest of 37% of your net trade income assessed, with a CPF relief cap of $37,740, or the actual amount contributed by you in the year 2023.

8. Apply for Relevant Government Assistance

Sometimes, some of us just need an extra helping hand… and when you need it, look out for government assistance programmes that are meant to provide financial assistance for emergency uses.

Take your time to read up about policies, eligibilities and if you qualify for any schemes, as this might be useful someday.

  • Explore available government assistance programs
  • Check eligibility criteria for ComCare support
  • Seek guidance from social service agencies for application assistance.

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While the CPF initiative may be great for long-term planning, there are short-term pains that platform workers have to experience which resulted in mixed reactions.

Navigating this evolving landscape requires strategic financial planning, and as the gig economy continues to evolve, platform workers must adapt and take proactive steps to manage their finances effectively, ensuring stability and resilience in the face of economic uncertainties.

What are your thoughts?

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About Hui Juan Neo
A savvy shopper and foodie at heart, I'm always on a lookout for discounts and deals to snag the best bargains.
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