With the rise of the gig economy in Singapore, the Government has announced last year during Parliament a new “contribute-as-you-earn” (CAYE) model to help them with their healthcare and retirement needs.
Under this model, freelancers and self-employed persons (SEPs) can make small and regular MediSave contributions, instead of paying bigger lump sums at the end of the year.
This is similar to how employers pay a contribution to their workers’ Central Provident Fund (CPF) accounts alongside their salaries every month, explained Manpower Minister Josephine Teo.
While CPF deductions now stand at 20 per cent, the MediSave contributions for each transaction is still undecided.
The Government is still working on this, along with other implementation issues, as it works toward to pilot the scheme by 2020.
Minister Teo said that this pilot will be rolled out to freelancers hired by the Government, and has no plans as of yet to extend it to the private sector.
CAYE Would Be Beneficial For Those In Private Sector Too
With CAYE, the service buyer (in this case, the Government) hiring the freelancer has to make a contribution to the person’s MediSave account as and when they are paid for their work.
It adds convenience and the self-employed persons don’t have to worry about having to contribute bigger lump sums during ‘dry seasons’.
They also start getting the 4 per cent MediSave account interest earlier.– Josephine Teo, Minister of Manpower
Real estate agents for one, face difficulties in paying the compulsory yearly contributions into their Medisave accounts.
Contributions are based on the previous year’s income, and they have raked in lower earnings this year due to the weakening economy.
Moreover, freelance workers usually have no medical benefits and the loss of income could be an added burden.
Minister Teo has noted these concerns but stressed that paying MediSave contributions is an “obligation” for a self-employed person.
If we open this scheme to the private sector and you believe this scheme to be helpful to you, then before the commission is paid out to the agent, at the backend you can calculate what the MediSave contribution should be… and that goes into the (MediSave).
Doing such calculations can be troublesome however. If CAYE opens up to the private sector, they no longer need to constantly calculate and worry about their MediSave contributions.
However, it can also be difficult for those who are just trying to make ends meet yet still have to set aside money for MediSave.
Featured Image Credit: Bloomberg