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New scheme to help some freelancers with their MediSave contributions amid changes to CPF law

SINGAPORE: Freelancers who provide their services to the Government and public sector agencies will have a portion of their fees paid to their MediSave accounts under a new pilot scheme, after Parliament passed amendments to the Central Provident Fund (CPF) Bill on Monday (Nov 4). 

The Contribute-As-You-Earn (CAYE) scheme, first mooted by a tripartite workgroup and later accepted by the Government in March 2018, aims to help self-employed persons (SEPs) "keep up with their MediSave contributions (and) strengthen their protection against health shocks", said Manpower Minister Josephine Teo as she presented the Bill for a second reading.

About 6,000 SEPs hired by the Government will come under the pilot programme starting on Jan 1, 2020.

“As a service buyer, the Government can help SEPs directly transmit their contributions to their MediSave Account and then pay the rest of the service fee to them,” said Mrs Teo.

Currently, those who are self-employed make yearly MediSave contributions if they earn an annual net trade income of more than S$6,000, according to the CPF's website.

Depending on the worker’s age and annual net trade income in the previous year, the contribution rate ranges from 4 per cent to 10.5 per cent.

Net trade income is the gross trade income minus all allowable business expenses, capital allowances and trade losses.

This approach of making yearly contributions for past years’ earnings can be improved, Mrs Teo said.

“Unlike regular employees, SEPs do not have a simple process to make small regular contributions as and when they earn income.

“When the time comes to make the out-of-pocket lump-sum contribution the following year, SEPs with cash flow constraints face difficulties. This happens more often than not.”

About 130,000, or 60 per cent, of those who are self-employed “do not make their Medisave contributions in full in a lump sum” in any given year, the minister added.

READ: Tripartite workgroup makes 7 recommendations to address challenges faced by freelancers

Under the pilot, these freelancers will be able to make “smaller and regular contributions” to their MediSave accounts each time they are paid for their work. 

The CAYE scheme can also help those who are self-employed to grow their MediSave monies.

“By contributing earlier, he will accrue more interest on his MediSave contributions," said Mrs Teo.


Mrs Teo said that as part of the ministry's consultation for the Bill, in-depth discussions were held with the National Trades Union Congress and leaders of SEP associations.

She noted that they generally welcomed the scheme and recognised its benefits, but there was concern about some SEPs already falling behind in payments. 

Specifically, Member of Parliament (MP) Ang Hin Kee and several association leaders suggested that the Government provide some matching of contributions under CAYE.

Mrs Teo said it was a "good suggestion" and that the Government would "look into providing some support for SEPs participating in the CAYE pilot". 

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During the debate, Mr Ang asked if the Government would consider co-paying MediSave contribution for SEPs who transact with the public sector, as they might face the “extra burden” of settling outstanding MediSave contributions from the previous year coupled with deductions under the new scheme.

Non-Constituency MP Daniel Goh said the Government could leverage CAYE to encourage self-employed workers to make regular voluntary contributions to their CPF with the right incentive.

For example, he said SEPs could opt in to contribute 10 per cent of their income up to the monthly contribution ceiling of S$6,000 through CAYE.

“The Government could incentivise this by offering a flat and thus progressive CPF top-up of, say, S$300 a year to self-employed workers who join this programme for the whole year,” he added. “Progressive service buyers could be encouraged to match the Government’s CPF top-up.”

In her closing speech, Mrs Teo said the suggestion on incentives is “really not new” and that the Government has been studying it.  

READ: Nearly 500 companies adopt tripartite standard for self-employed

As for helping SEPs cope with CAYE, the minister reiterated what she said in her opening speech: “The Government is studying their suggestions seriously and will provide more details when ready.”

On the other hand, SEPs who have made their MediSave contributions in full or are keeping up via an instalment plan, will be allowed to opt out of this pilot.

“Some SEPs are more comfortable with the current model of MediSave contributions and may prefer not to be on CAYE yet,” she said.

The Government will also help the 600 SEPs who have not been keeping up with their MediSave contributions avoid their arrears from snowballing.

“We can, for example, look at their instalment plan and see whether there is room to stretch it out," she said.

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Meanwhile, Nominated MP Walter Theseira suggested that CAYE be applied “more creatively” to help SEPs who face “peaks and troughs” in their incomes, like an external school sports coach who conducts training sessions continuously in the run-up to competitions but encounters low demand during the exam season.

“CAYE could be used to help SEPs manage their incomes, by taking a greater share of contributions from high earning periods, and lower contributions or even no contributions, when earnings are low,” he said.

“A well-designed CAYE could allow SEPs to contribute to CPF with significantly less pain.”

Mrs Teo responded to this in her closing speech, saying that the Government will study his suggestion. 

As for calls to widen the scheme, the minister said a decision has not been taken on whether CAYE will be extended to include payments made to freelancers by private sector companies or intermediaries, such as for insurance and real estate agents.

This is despite some of the intermediaries having already indicated interest.

“Currently, there are no plans to extend to the private sector,” she said. “We can decide later depending on the results of the pilot, but those who wish to volunteer are welcome to approach us to explore.”

READ: CPF's Retirement Sum Scheme payouts to last till 90 years old, instead of 95


The CPF Act was also amended to address the evolving needs of employers, as well as clarify and streamline the administration of the CPF Act. 

For the former, the CPF Board will be allowed to make refunds in circumstances that arise from evolving employment practices.

MOM raised the example of how employers may structure wage components that are tied to contractual conditions, such as a sign-on bonus with a minimum service period condition.

If the employee does not fulfil the conditions of the contract, he must return the conditional component of his wage and the CPF contributions to the employer.

Currently the CPF Act does not allow the CPF Board to grant refunds for this repayable component.

With the amendment, employees and employers will have the flexibility to apply for a refund of the CPF portion within a year of having to return the conditional wage.

Source: CNA/hz(hs)


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