Help self-employed boost retirement, health savings

Self-employment was once the last resort for many Singaporeans. At independence, one in three was unemployed. Dr Albert Winsemius, Singapore's pioneering chief economic adviser, noted that people "became hawkers to escape unemployment".

But today, the rapid rise of self-employment through online platforms or the "gig" economy suggests that working independently may be more a choice than a last resort. The McKinsey Global Institute claims up to 30 per cent of the working population in the United States and European Union have been independent workers. More conservative estimates from economists Lawrence Katz and Alan Krueger show independent work grew from 7 per cent to 10 per cent of the US labour force from 2005 to 2015.

In Singapore, the first supplementary survey in 2016 of "own account workers" by the Ministry of Manpower (MOM) estimates 10 per cent of all workers are self-employed independent workers, or "freelancers", with about 179,700 residents freelancing in their main job.

Although online gig platforms are growing rapidly, most freelancers in Singapore still hold traditional jobs: they are taxi drivers, property and insurance agents, hawkers, tradespeople and professionals.

The self-employed have freedom at work but this comes at the cost of risk and uncertainty. The MOM survey finds half of all freelancers fear insufficient work, one-third are concerned they lack employment benefits such as sick leave and insurance, and one in five worries about not being paid for work done.

Employees share these concerns. However, labour policy protects employees against summary termination, requires employers to offer minimum benefits, and offers help to claim unpaid wages.

The self-employed are generally not protected by labour policy because there is no clear employer and it is often impractical to make clients or customers take on the role of employers. But the survey identifies a need to adapt and extend labour policies to protect the self-employed where feasible.

Policymakers should hear directly from the self-employed, especially those who face day-to-day challenges in their work. The tripartite workgroup on self-employed persons has opened a public consultation on the Reach website that ends on Jan 12 (see box).

Once the public consultation process is over, the next step is for policy action.

With innovation, the number of self-employed people may grow in Singapore, leading to significant social costs as they are not required to contribute to the Central Provident Fund for retirement savings and cannot earn an income when sick. Singaporeans may also face higher taxes to help former freelancers with insufficient savings. PHOTO: LIANHE ZAOBAO

Why should we act now? First, policy today can be efficiently implemented through market intermediaries or platforms. Freelancers used to work independently. This makes many policies impractical due to the coordination costs. But today, market platforms coordinate freelancers.

Private-hire and taxi drivers get passengers through Grab and Uber, while insurance and property salespeople work through agencies. Platforms transfer payments from customers, keep in touch with their freelancers and maintain records. This means platforms can help implement policies to enhance protection for the self-employed, especially by collecting contributions for benefits on their behalf.


  • Members of the public can submit their feedback on the consultation paper on self-employed persons’ top concerns in the future economy. The paper can be viewed at

    Views can be sent to The consultation period has been extended to Jan 12.

Second, policy should prepare for a future economy where self-employment may become increasingly important as innovation raises the value of market platforms and lowers that of traditional firms. The growth of self-employment may create significant future social costs because the self-employed are not required to contribute to the Central Provident Fund for retirement and cannot earn income when sick or injured.

The potential social costs are staggering. The Silver Support Scheme now pays more than $320 million annually to the bottom 20 per cent of elderly Singaporeans. Many beneficiaries receive Silver Support because they had low and irregular incomes, and could not make enough CPF contributions. Freelancers face similar problems today. As self-employment expands, Singaporeans tomorrow may face higher taxes to help former freelancers with insufficient savings for their own retirement.

Third, the self-employed often lack bargaining power because they work independently and are easily replaceable by other freelancers. Policy may help address these inherent disadvantages.

Consider unpaid wages. Under the Employment Act, failure to pay wages is an offence, which gives employees power in wage disputes and allows MOM to mediate effectively. But freelancers who are unpaid must file claims in court, which can be costly and difficult. In addition, many freelancers work under implicit contracts, which are hard to enforce, or under contracts which favour counter parties.

For example, insurance agents stop receiving commissions for policies they have sold if they leave their insurance company. While this protects the insurer's interests - as the agent no longer services clients on the insurer's behalf - it clearly reduces agents' job mobility. Policy can develop best practices, such as model contracts and low-cost mediation for disputes, that ensure the self-employed have similar rights as employees to income they have earned.

However, protecting the self-employed involves real costs, and freelancers will have to contribute towards funding their own benefits. Alternatives, such as shifting payments for benefits to customers or market platforms, would simply cause a fall in the fees or prices of services that freelancers can charge.

But the potential benefits from enhanced protection should outweigh the costs. For example, group medical insurance, if required by policy, could be cheaper than individual insurance because of risk pooling: compulsory coverage avoids the adverse selection problem where only the riskiest buy insurance and premiums rise as a result.

More generally, workers should not be attracted to freelancing just because the take-home earnings are higher than regular employment, where wages are partially paid in benefits.

Many freelancers are not well paid. But low pay has to be addressed by improving job prospects rather than by boosting take-home income at the expense of future social costs.

One policy that could yield immediate benefits is to help the self-employed make their mandatory Medisave contributions. Freelancers today must actively set aside money for Medisave contributions because income is earned today but contributions are due the following year.

Although some intermediaries, such as the taxi operators, already help contribute to Medisave through the Drive and Save scheme, freelancers must still contribute out of pocket.

To solve this, market platforms could deduct Medisave contributions from income when it is earned - just as employers deduct CPF contributions from employee wages.

In fact, once a practical and cost-effective payment system is established, it is possible to go a step further and encourage the self-employed to make voluntary contributions to their CPF retirement accounts automatically when income is earned.

• Dr Walter Theseira is a senior lecturer at the School of Business, Singapore University of Social Sciences.

A version of this article appeared in the print edition of The Straits Times on January 04, 2018, with the headline 'Help self-employed boost retirement, health savings'. Print Edition | Subscribe