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CPF Act amended to allow freelancers working in public sector to be part of pilot CAYE scheme

SINGAPORE — From the start of next year, self-employed persons who provide services to the Government or public sector agencies will have a part of their pay transferred directly into their Central Provident Fund (CPF) MediSave accounts.

CPF Act amended to allow freelancers working in public sector to be part of pilot CAYE scheme

About 6,000 self-employed persons will be included in a pilot scheme to help them keep up with their CPF MediSave contributions, and to “strengthen their protection against health shocks”, Manpower Minister Josephine Teo said.

SINGAPORE — From the start of next year, self-employed persons who provide services to the Government or public sector agencies will have a part of their pay transferred directly into their Central Provident Fund (CPF) MediSave accounts.

The introduction of the pilot contribute-as-you-earn (CAYE) scheme was one of the key changes to the Central Provident Fund Act (Amendment) Bill, which was passed in Parliament on Monday (Nov 4).

Manpower Minister Josephine Teo said that only about 6,000 self-employed persons will be included within this programmes, such as freelance sports coaches for schools.  

So a freelance football coach who does work for the Government, for instance, will have his MediSave contribution first paid out by the Government before he gets the rest of the payment for the job.

The scheme is meant to help this group of people or those who do freelance work keep up with their MediSave contributions, and to “strengthen their protection against health shocks”, Mrs Teo said.

These savings in the MediSave accounts help to pay a part of their medical bills where applicable.

Mrs Teo also said that there will be “absolutely no change to the obligations” of the self-employed for CPF contributions.

Right now, those who are self-employed and have a yearly net trade income of more than S$6,000 must make MediSave contributions in a lump sum every year based on their earnings the year before, or after they get their tax bill.

Mrs Teo said: “The only change concerns how those contributions are made. Instead of a lump-sum payment once a year, small contributions will be made from the self-employed person’s income each time the income is earned.”

Presently, companies or employers pay freelance workers their full service fee.

However, once the CAYE scheme kicks in on Jan 1 next year, they will take a percentage of the freelancer’s net income — after deducting expenses — and put it directly into the freelancer’s Medisave account. The amount of Medisave contribution varies by age and income.

A total of seven Members of Parliament (MPs) spoke up after the amendments were tabled, and they were broadly supportive of the changes.

They were: Mr Ang Hin Kee, MP of Ang Mo Kio Group Representation Constituency (GRC), Ms Jessica Tan (East Coast GRC), Mr Patrick Tay (West Coast GRC), Mr Zainal Sapari (Pasir Ris-Punggol GRC), Mr Daniel Goh (Non-Constituency MP with the Workers' Party), and Nominated MPs Arasu Duraisamy and Walter Theseira.

The MPs asked if more could be done to protect the self-employed. Here are some of the questions which Mrs Teo addressed.

1. Could CAYE potentially increase delays in payments to self-employed persons?

Mrs Teo said that payment disputes arise out of “unclear” contract terms.

“As such, we have launched the Tripartite Standards on contracting with self-employed persons to reduce payment-related disputes,” she said.

Essentially, the standards are a set of good employment practices that all employers should implement at their workplaces. They cover various aspects of employment areas such as fair recruitment practices, flexible work arrangements, processes for handling grievances, and more.  

2. Can the self-employed opt out of the pilot?

Mrs Teo said that they can opt out of the CAYE scheme and “set their contribution rates to zero”, though this will require them to meet certain conditions.

For instance, they must have contributed to their MediSave in full every year, or are keeping up contributions under an instalment plan.

3. What happens to self-employed workers who have cash-flow constraints?

For the small group of about 600 self-employed persons “who are not keeping up” with their MediSave contributions, Mrs Teo said that CAYE will certainly help them avoid “snowballing arrears”.

She said that if any of them needs more support, the Government is prepared to help based on specific circumstances.

“We can, for example, look at the instalment plan and see whether there's room to stretch it out,” she said.

4. Will CAYE be extended to the private sector?

Mrs Teo said that there are no plans to do so for now, though it is something that can be decided on at a later date, depending on the results of the pilot.

However, she said that freelance workers who are keen to volunteer to be part of the CAYE are “welcomed” to approach the Ministry of Manpower to discuss further.

On Mr Tay’s suggestion to review the scope of the Trade Unions Act to cover freelancers, she said that it could be explored if there is support from the relevant associations.

5. Are there plans to extend contribution obligations to a self-employed person’s CPF Ordinary and Special Accounts?

While there are no plans for doing so, Mrs Teo said that freelance workers are encouraged to make voluntary CPF contributions.

Responding to Mr Goh’s suggestion of using incentives to encourage regular voluntary CPF contributions, Mrs Teo said that it was something the Government had been studying and would be able to give an answer “in the goodness of time”.

6. Are self-employed persons who hold regular jobs required to make CAYE contributions?

This refers to a self-employed person who is also working as an employee with a company.

Mrs Teo noted that they are thus no different from employees who hold more than one job.

“The employee will also make two streams of contributions from the two jobs,” she added.

However, she reminded the House that there is a cap on total CPF contributions.

A self-employed person, who is concurrently an employee hired by a firm or agency, will not need to contribute beyond this cap if they make an application to the CPF Board.

CPF’s website states that if a self-employed person has a total annual income of at least S$72,000, excluding wage supplements such as annual bonus, the person can apply to the CPF Board to limit their MediSave contributions.

7. Can CAYE contribution rates be varied?

Associate Professor Theseira suggested allowing the self-employed to vary their CAYE contribution rates according to their income “peaks and troughs”.

Mrs Teo said that this was a very “interesting idea” and as to how it may be implemented, it would have to be studied.

8. How are the self-employed being supported? 

The Government has been supporting the development of skills training, both technical and non-technical, for this group of workers, Mrs Teo said.

 “The relevant skills frameworks that SkillsFuture Singapore puts out now takes into account the needs of (these workers).”

To protect them from a loss of income due to prolonged illness or injury, Mrs Teo said that the Government has worked with insurers to introduce prolonged medical leave products. 

Mrs Teo said that close to 30,000 self-employed persons are covered by such insurance plans. This is about half of those in occupations such as private-hire car drivers and food-delivery riders, she added.

“This (prolonged medical leave) product is relatively new to the market, so 30,000 is really not a bad start.”

As to whether the take-up can be increased, she said that the Government is keen to promote it, but ultimately, it will be up to freelancers to decide for themselves.

For those who rely on self-employment as their main source of income, Mrs Teo said that prolonged medical leave protection would be important.

However, she noted that quite a number of self-employed persons have other sources of income.

In other cases, some of these workers would assess that their “risks are very low”, and that they would rather not have to incur the upfront costs of such an insurance product, she added.

Related topics

cpf MediSave Josephine Teo self-employed freelance workers CAYE

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