Budget 2023: Lower-income gig workers to get more support when higher CPF contribution rates kick in

More details about this transition support scheme will be shared when the Ministry of Manpower’s spending plans are debated. ST PHOTO: KELVIN CHNG

SINGAPORE - Private-hire car drivers, freelance delivery workers and cabbies who earn $2,500 or less a month will get some relief when a move to raise their Central Provident Fund contribution rates kicks in.

For the first four years after the higher CPF rates are implemented, this group of lower-income platform workers will get additional support to cushion the impact on their take-home pay, said Deputy Prime Minister and Finance Minister Lawrence Wong in his Budget 2023 speech on Tuesday.

More details about this transition support scheme will be shared when the Ministry of Manpower’s (MOM) spending plans are debated, he added.

The Ministry of Finance said the additional support will offset a part of a platform worker’s share of the planned year-on-year increase in CPF contribution rates, which is expected to start from the latter half of 2024 at the earliest.

Singaporean platform workers who earn a total of $2,500 or less a month from platform work and other employment sources will be eligible for the support scheme if they are required to contribute at the higher CPF rates, or if they opt in.

Platform workers, like other self-employed people, are currently required to contribute up to 10.5 per cent of their net trade income to their CPF MediSave account.

But they, and the platform companies that give them work, are not obliged to contribute to their CPF Ordinary Account or Special Account, typically used for housing and retirement.

In November last year, an advisory committee set up by MOM proposed that CPF contribution rates for platform workers be aligned with those of regular employees and employers – which are 20 per cent and 17 per cent, respectively, for workers aged 55 and below.

The Government accepted this recommendation and 11 others that cover areas like work injury compensation, and is working on implementing them.

MOM has said changes to the CPF contribution rate for platform workers will take place over a five-year period.

The contribution rate will increase from a lower base by 2.5 to 3.5 percentage points per year until it reaches parity with other sectors, barring any major economic events.

The higher CPF payments will be compulsory only for those who are below 30 when the changes kick in. Everyone else can choose to opt in or not.

MOM has also said that the CPF contribution rates will apply to a platform worker’s total earnings, after expenses are deducted.

For private-hire car drivers and taxi drivers – who are allowed to use a fixed expense ratio of 60 per cent for tax deductions –this means the CPF contribution rate will apply to 40 per cent of their gross earnings.

The upcoming changes to CPF policy have caused unhappiness among workers and companies alike.

Major platform companies here, such as Grab, cried foul over an exemption given to street-hail taxi drivers, which they say might give taxi companies an unfair cost advantage.

At a recent dialogue held by MOM and the National Trades Union Congress, platform workers raised a myriad of concerns about the changes to the CPF regime, including fears that platform companies may discriminate against workers who opt for the higher contributions.

Participants at the dialogue also had worries about whether platform companies would increase commission charges to cover the cost of their share of CPF contribution for workers.

Ms Anna Low, head of personal tax and global mobility services at KPMG in Singapore, said the new CPF transition scheme could potentially translate to a maximum of $500 in support per worker.

In the longer term, she said it is important that platform workers invest in upskilling, adding that this is a sector that the new Jobs-Skills Integrators may want to focus on.

She said: “While the support scheme is for four years, it gives platform workers and their employers enough time to adjust to the changes...

“This will certainly help companies retain their platform workers and avoid the potential impact of reduced manpower.”

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