This article was written in collaboration with the National Trades Union Congress. All views expressed in this article are the independent opinion of DollarsAndSense.sg based on our research. DollarsAndSense.sg is not liable for any financial losses that may arise from any transactions and readers are encouraged to do their own due diligence. You can view our full editorial policy here.
Platform Workers – Delivery Workers, Private-Hire Car Drivers and Taxi Drivers on online platforms – now account for nearly one-third of all self-employed Singaporeans. On the back of this significant growth in Platform Workers, ensuring they have sufficient protection is important.
This is exactly what the Singapore Government did – by accepting all 12 recommendations by the Advisory Committee on Platform Workers to strengthen their protections. As Labour MP Ms Yeo Wan Ling shared, it has been a journey of over one year and consults with over 20,000 stakeholders. The Unions called for :
- better protection of livelihoods and lives,
- building up of retirement & housing adequacy,
- stronger representation powers for gig platform workers
One of the key protection pillars is requiring Platform Companies to start making mandatory CPF contributions in the latter part of 2024. Beyond the compulsory contributions to their CPF MediSave Account (MA) currently, they will also start contributing to their Ordinary Account and Special Account.
In short, Platform Workers will still not be classified as employees, but will get to enjoy being part of the CPF contribution framework. This will improve their housing and retirement adequacy, without compromising the flexibility of their work.
As with such major policy changes, there will be pros and cons that all parties will have to navigate – and we look at some of these.
Pro #1 Compulsory CPF Contributions Will Mean A Higher Overall Pay For Platform Workers
With CPF contributions, Platform Workers can earn between 7.5% and 17% more, depending on their age group. This comes from the employer CPF contribution component that is beyond their current pay packet.
| Employee Age (Years) | Contribution Rates (for monthly wages ≥ $750) | ||
| Employer (% of wage) | Employee (% of wage) | Total (% of wage) | |
| 55 and below | 17 | 20 | 37 |
| Above 55 to 60 | 14 | 14 | 28 |
| Above 60 to 65 | 10 | 8.5 | 18.5 |
| Above 65 to 70 | 8 | 6 | 14 |
| Above 70 | 7.5 | 5 | 12.5 |
Such a move will align Platform Workers’ CPF contributions with what employees of the same age and earning the same amount would receive.
Pro #2 Platform Workers Can Start Building Their Retirement Savings From A Young Age
Building a retirement nest egg is arguably one of the biggest and most important financial goals. In Singapore, employees have to make mandatory CPF contributions every month, part of which goes into their Special Account, meant to build up their retirement nest egg.
Platform Workers are not required to do so currently. Hence, it comes as no surprise that the report by the Advisory Committee on Platform Workers found that full-time young Platform Workers only have an estimated 10% of what an employee with similar earnings would have in their CPF accounts. Even for Platform Workers over 55, only 1 in 4 of them was able to meet their Basic Retirement Sum (BRS).
With compulsory CPF contributions to their Special Account (SA), Platform Workers would be in a similar position to employees with similar lifetime earnings.
Read Also: 4 Important Decisions That Will Impact Your Retirement Nest Egg In Singapore
Pro #3 Platform Workers Can Proactively Save For Their Home Down Payment As Well
Many in Singapore also make use of their CPF contributions – via the Ordinary Account (OA) – to pay for their homes. CPF OA balances can be used to pay for the down payment on a home as well as monthly home loan repayments.
Again, without mandatory CPF contributions to their Ordinary Account, Platform Workers might have insufficient savings to finance a roof over their heads. Younger Platform Workers may have a greater need for this as they are unlikely to have purchased a home, compared to their older peers.
Pro #4 Compulsory CPF Contributions Will Lessen Cash Flow Stress And Administrative Burden For Platform Workers
Currently, Platform Workers are treated like Self-Employed Persons (SEPs) – and have to contribute to their CPF MediSave Account (MA). As the amount is only known after they declare their Net Trade Income the following year, they may not have sufficient cash on hand to make the required contributions.
In fact, it was found that 1 in 5 Platform Workers have not been keeping up with their MediSave Account contributions.
Once CPF contributions are mandatory for Platform Workers, Platform Companies will not only start contributing their share of the Employer CPF Contributions, but also collect the Employee component of the CPF Contributions from Platform Workers.The government is working with the companies on a new mechanism to deduct CPF contributions from platform workers’ earnings as and when they receive their income.
There will be no additional computation required by Platform Workers. This will not only reduce administrative stress on Platform Workers, but also improve their cash flow management as the Platform Companies will be tasked with collecting and making the monthly CPF contributions.
Pro #5 Platform Companies Can Be Seen As Part Of The Solution
In Singapore, co-contributions between workers and companies are a key feature of the social compact. This will now be extended to Platform Workers and Platform Companies.
With CPF contributions, Platform Companies can contribute to the protection of Singaporeans’ retirement and housing needs. This enables them to address the precarious financial position of workers in their industry without compromising the fact that job flexibility still remains in their hands.
Platform Companies may need to put in additional time, effort, and money to develop a mechanism to collect CPF contributions from their Platform Workers. The government will work with Platform Companies on this.
Con #1 Platform Workers Have To Cope With A Lower Take-Home Pay
While Platform Workers may earn up to 17% more from employer CPF contributions, they may have a lower take-home pay because they have to make an employee CPF contribution of up to 20%.
For example, a 30-year-old full-time private-hire car driver earns a monthly income of $2,000. With a 17% employer CPF Contribution component, his monthly income can rise to $2,340. However, his take-home pay will fall to $1,600. Without the compulsory CPF contributions, he would still have to make MediSave Account contributions of 8% – and have an effective take-home pay of $1,840.
The Labour Movement is pushing for more support should CPF contributions be implemented. There needs to be necessary support provided for platform workers through the transition period where CPF contributions are enforced, to mitigate the impact on their take-home pay.
Con #2 Platform Companies Will See Business Cost Rise Significantly
Obviously, Platform Companies will see a significant increase in their business costs.
Apart from the hefty up to 17% employer CPF contribution component, they also have to incur the cost of developing the mechanism to collect employee CPF contributions. They might also have to spend time and money and possibly hire more people to manage the process afterward.
Con #3 Prices On Platforms May Increase For Consumers
With higher business costs for Platform Companies coupled with a potentially lower take-home salary for Platform Workers, consumers may be burdened with higher prices to make up for the shortfalls. This will only add to the cost of living for Singaporeans.
Potentially, higher costs may also lead to lower demand – and potentially lower earnings for Platform Workers and Platform Companies.
CPF Contributions For Platform Workers To Be Phased In From 2024
Given that there are obvious pros and cons and operational challenges that still need to be addressed, CPF contributions for Platform Workers will only be required in the latter part of 2024. This will give the Platform Companies and the Government sufficient time to build up the necessary infrastructure to support this effort.
“More work lies ahead to operationalise the recommendations, and the NTUC is committed to ensure that the roll out is fair and (recommendations) are not at the expense of our workers’ earnings.“ – Ms Yeo Wan Ling
From the get-go, compulsory CPF contributions will not be required for all demographics either. Those who stand to benefit the most are the young Platform Workers below 30 years old. Full CPF contributions will start for this group first.
To make the scheme more equitable, Platform Workers who are 30 and above can opt in to the CPF contribution regime. Alternatively, they do not have to join in from Day 1, as they may prefer a higher take-home salary and may have fully paid off their home mortgages.
The recommendations also recognise that it may be challenging to implement a full CPF contribution regime immediately and suggest a phased approach over five years. This is a similar approach that the Government takes to effect higher CPF contributions for older employees.
The report also addressed the requirement for the Government to consider additional support for Platform Workers to mitigate the impacts of lower take-home pay. NTUC reiterated the need for such support, stating that “there needs to be necessary support provided for platform workers through the transition period where CPF contributions are enforced”.
Contribute Your Views For A Better Future Work Environment
The recommendations were set out following extensive on-the-ground outreach to more than 20,000 Platform Workers, over 30 companies and trade associations, as well as 2,700 consumers who use platforms for delivery and P2P transport.
Labour MP Ms Yeo Wan Ling also called on more Platform Workers to join in conversations on how to better protect their livelihoods through the upcoming implementation of the recommendations.
Platform Workers, and all other workers, can contribute views and aspirations for a better future work environment through NTUC’s #EveryWorkerMatters Conversations.
The post Pros And Cons Of Requiring Compulsory CPF Contributions For Platform Workers appeared first on DollarsAndSense.sg.
0 Mga Komento