(Delivered in Parliament on 4 November 2019)
Mr Deputy Speaker Sir, this CPF (Amendment) Bill seeks to pilot the Contribute-As-You-Earn Scheme for self-employed workers. The scheme will see service buyers deduct a portion of their payment to self-employed workers to contribute to the workers’ Medisave accounts. This scheme actually does not make any material change to the workers’ position since they already have to make a contribution to their Medisave account based on their previous year tax returns. What it does is to smooth out the contributions so that workers will not face a situation where they have to fork out a lump sum annually and may not have enough cash on hand to do so. This scheme is also limited in that it is to be piloted by the Government and affecting only self-employed workers on contracts for service with the Government.
A critic could give a cynical shrug to this limited move by the Government and argue that this does not change the status quo, except to secure contributions to Medisave. I am not going to see it this way. Rather, I choose to see the Contribute-As-You-Earn Scheme as a wedge that could open the door for the Government to regulate the self-employed work sector and do more for self-employed workers. In the spirit of the Contribute-As-You-Earn Scheme to address the income protection, retirement adequacy and contracting issues faced by self-employed workers, I will speak on these three areas accordingly, in terms of the next steps the Government can take to do more for self-employed workers.
Income Protection
The first area where the Government can do more for self-employed workers is to address income protection linked to work-related injuries and medical exigencies.
Firstly, self-employed workers are not covered by the Work Injury Compensation Act. This is despite the fact that self-employed workers are exposed to the same work-related injury risks as their counterparts who are considered “employees”. With regards to work-related injuries, this difference between a self-employed worker and an employee is more a legal artefact rather than a distinction grounded in reality.
The Minister had said in July in reply to a question on work injury insurance for food delivery riders by the Honourable Member Mr Desmond Choo that the distinction between employee and self-employed workers is that a company has control over the work arrangements of employees but has no full control over the work arrangements of self-employed workers.
Surely this is overstating the case in reality. On the one hand, companies often have considerable control over the work arrangements of self-employed workers, especially for companies operating in the gig economy using membership tiering, incentives and penalties to regulate workers’ discretion. On the other hand, companies do not often have full control over the work arrangements of employees, especially for companies operating in the gig economy as the same digital platforms will be used for different categories of workers.
I believe the Ministry is aware that the distinction is not black and white. Thus, Minister Teo said that the Workplace Safety and Health Council has been encouraging food delivery companies to buy personal accident insurance for all their riders, and that major operators Deliveroo and Grabfood already do so. Given this blurred distinction between self-employed workers and employees in the new economy, would it not make more sense for the law, for WICA, to change to include self-employed workers?
Secondly, self-employed workers may not have enough income protection if they face medical exigencies. Based on the Tripartite Workgroup’s recommendations, the Ministry worked with insurers NTUC Income and Gigacover to offer Prolonged Medical Leave insurance to self-employed workers. The insurance provides income of $60 to $80 a day for hospitalisation and prolonged medical leave. This is good progress.
However, almost two years have lapsed since this initiative was started and the low participation of self-employed workers may be a concern. The Ministry promoted the insurance to two occupational groups that together comprised 30 per cent of all self-employed workers, namely sports coaches and instructors and taxi and private-hire drivers. I would like to ask what percentage of self-employed workers in these two occupational groups are now covered by Prolonged Medical Leave insurance?
Also, Minister Teo mentioned in the COS debate in March this year that Grab and Gojek were providing free Prolonged Medical Leave insurance to regular drivers and that ComfortDelgro was considering. Is ComfortDelgro now providing the insurance to its taxi drivers?
Would the Minister consider legislating to make it compulsory for service buyers in certain sectors to purchase Prolonged Medical Leave insurance for their regular self-employed workers? Many self-employed workers are regular contractors with the same service buyers for many years and even decades. The self-employed workers in the two occupational groups fit this description. This is due to the oligopolistic or monopolistic character of the sectors they work in. The distinction between self-employed workers and employees are blurred in such sectors. Grab and Gojek recognise this and provide free Prolonged Medical Leave insurance to their regular drivers. It would make sense thus to legislate for income protection insurance for such sectors.
Retirement Adequacy
The second area where the Government can do more for self-employed workers is to address retirement adequacy leveraging the Contribute-As-You-Earn scheme and also the SkillsFuture movement.
Firstly, it is known that self-employed workers are deprived of CPF savings since they miss out on the 20 per cent of wages employees are compelled to save and the 17 per cent additional contribution by employers. The Government has urged self-employed workers to make voluntary contributions to their CPF if they can afford to do so. But the problem is that self-employed workers are already lagging in their savings compared to employees. A Manulife survey in 2018 found that in reference to a $1 million retirement savings target, the average savings gap of self-employed workers was 55 per cent larger than regular employees.
One way to address this issue is to leverage the Contribute-As-You-Earn scheme to encourage self-employed workers to make regular voluntary contributions to their CPF with the right incentive. For example, self-employed workers could opt in to contribute 10 per cent of their income up to the monthly contribution ceiling of $6,000 through the Contribute-As-You-Earn scheme. The Government could incentivize this by offering a flat and thus progressive CPF top-up of, say, $300 a year to self-employed workers who join this programme for the whole year. Progressive service buyers could be encouraged to match the Government’s CPF top-up.
Secondly, with the national skills development framework well in place and catered to employees, self-employed workers who are deprived of SkillsFuture support could become disadvantaged. As many self-employed workers treat their gig work as temporary jobs to transit to full-time employment, they could become disenfranchised if they are unable to tap into SkillsFuture support and resources to upskill to make the transition.
Ultimately, given the structure of our labour market and our national pension system, it makes sense to safeguard the retirement adequacy of our self-employed workers by helping them upskill and transit to full-time work as employees benefiting from full CPF contributions. Self-employed workers make up 8-10 per cent of our workforce. This is a significant group. The SkillsFuture movement cannot afford to ignore self-employed workers. There need to be schemes targeted at self-employed workers to upgrade and develop their skills.
Contracting Issues
The third area where the Government can do more for self-employed workers is to address contracting issues in terms of standards and the test for dependency.
Firstly, most self-employed workers are still not covered by basic standards of contracting. In a recent reply to a question by the Honourable Member Assoc Prof Walter Theseira, Minister Josephine Teo said that, as of July 2019, 47,000 workers were covered by the Tripartite Standard for Contracting with Self-Employed Persons, as adopted by 600 employers. This barely covers a quarter of the 200,000 self-employed workers reliant on proper contracting to earn their living.
It is stated that the Tripartite Standard “specifies a set of fair and progressive employment practices for service contracts that all service buyers should implement at the workplace”. The practices comprise terms of products or services to be delivered and written key terms that include names of contracting parties, parties’ obligation such as nature of services to be provided, and payment due for each product or service and due date of payment. These are very basic practices underpinning a contract for service. As fundamental practices, should not the Tripartite Standard be made mandatory for all companies seeking to contract with self-employed workers?
Secondly, in the last three years, of the total of 308 cases of suspected misclassification received by the Ministry, 160 cases involved workers assessed to be misclassified as self-employed workers, with an average of about 100 workers a year found to be misclassified. Affected employees were paid overtime pay and CPF contributions due to them. What were the criteria used to assess misclassification? Should these criteria be used to test whole occupational groups to see whether there is systematic misclassification due to new digital technologies allowing for platform engagement work?
In Australia, there has been discussion about the test of dependency with regards to platform engagement work. The argument is that many independent contractors signing on to work on digital platforms end up being dependent on the control and direction of the company they are working for, which looks like regular employment. Unions have pointed out that companies in the gig economy exhibit multiple features of employment such as regulating the behaviour of workers, providing equipment to perform work, interviewing and screening workers, providing training, arranging shift rosters, and so on.
Is the test of dependency a valid test in Singapore for distinguishing between self-employed workers and regular employees? If so, should not the Government conduct a systematic review of all classification of self-employed workers, especially in key sectors of the gig economy?
The Wedge
Mr Deputy Speaker Sir, the Contribute-As-You-Earn scheme is a wedge that keeps the door open for us to discuss, debate and act on improving the lot of self-employed workers as they navigate the new economy. I have argued that WICA should cover self-employed workers, that we should legislate for income protection in oligopolistic sectors, that we should encourage regular voluntary CPF contributions using incentives, that there should be SkillsFuture schemes targeted at upskilling self-employed workers, that the Tripartite Standard for Contracting with Self-Employed Persons be made mandatory, that the test of dependency might be applied to the current classification of self-employed workers contracted to platform companies. I support the Bill.