Central Provident Fund (Amendment) Bill

Order for Second Reading read.

4.51 pm

The Minister for Manpower (Mrs Josephine Teo): Mr Speaker, I beg to move, "That the Bill be now read a Second time."

The CPF system has evolved to meet the changing needs of each generation of Singaporeans. It started as a retirement savings scheme in July 1955, when many workers in small- and medium-sized companies did not receive retirement benefits from their employers. CPF helped them to have something for retirement. In 1968, in order to improve housing affordability, CPF usage was expanded to help members buy HDB flats. From 1981, CPF savings could also be used to buy private properties. This made home ownership a reality for over 90% of Singaporean households and helped them to share in Singapore’s growth. It also gave them an asset to rely on in retirement. In 1984, in order to meet rising healthcare needs, we created the MediSave Account. This helped Singaporeans cope with big healthcare expenses, such as hospitalisation. As life expectancy continued to rise, so did the risk of Singaporeans outliving their savings. In 2009, we started to transition from the Minimum Sum Scheme, now known as the Retirement Sum Scheme, to the CPF LIFE annuity scheme. Members on CPF LIFE have the assurance of a constant stream of retirement income for as long as they live.

[Deputy Speaker (Mr Lim Biow Chuan) in the Chair]

The CPF system is a continuous work-in-progress. Its three-in-one feature is also unique. No other retirement system tries to help people fulfil three basic needs in retirement – housing, healthcare and day-to-day spending. Comparisons with other systems often neglect this important fact. There is also considerable complexity mainly because new rules have to co-exist with previous rules for earlier cohorts.

Be that as it may, CPF should continue to evolve to meet the changing needs of our people. This Bill is part of that evolution. It will amend the CPF Act in two broad areas: first, to cater to changes in employment practices; second, to clarify and streamline the administration of the CPF Act.

With the Deputy Speaker’s permission, I will also use this opportunity to respond to Mr Chong Kee Hiong’s supplementary question earlier this afternoon and provide an update on the changes we are making to the Retirement Sum Scheme in response to feedback from members of the public.

In 2017, Ministry of Manpower had set up a Tripartite Workgroup on self-employed persons (SEPs) to look into the concerns of SEPs and make recommendations on how to address them. In both the Committee of Supply debates of 2018 and 2019, I gave updates on the Workgroup's recommendations and their implementation. One recommendation was to help SEPs save for their retirement and healthcare needs through the CPF system.

Today, SEPs must make contributions to the MediSave Account. Unlike regular employees, there is no requirement for them to contribute to the Ordinary and Special Accounts. Members know how MediSave Account balances can be very helpful. They can be used to pay for medical treatment and MediShield Life premiums, which helps with hospital bills. The converse is true: a depleted MediSave Account exposes the SEP to risks of not having the support for healthcare expenses when he or his family needs it most. Currently, SEPs make their MediSave contributions every year based on their earnings in the previous year.

This approach of making yearly contributions for past years' earnings can be improved. 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. In any given year, about 60% of SEPs do not make their MediSave contributions in full in a lump sum. This is very significant – about 130,000 of them.

As a result, some choose to pay via a 12-month instalment plan. Nonetheless, a significant number do not sign up for an instalment plan or have stopped paying their instalments. The root cause of this may be that these SEPs have irregular income. Should they wish to get back into regular employment with more steady income, we have many schemes to help them do so. In fact, last year, more SEPs switched to regular employment.

But for those who remain in self-employment, we should also find a way to help them avoid slipping further back. This is what the pilot is about – helping SEPs keep up with their MediSave contributions, to strengthen their protection against health shocks.

The first set of amendments will allow for a pilot "Contribute-as-you-Earn" scheme, CAYE for short. This will be for a small group of about 6,000 SEPs who provide services directly to the Government and public sector agencies. 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. The Government plans to start this pilot from 1 January 2020.

With your permission, Mr Deputy Speaker, may I ask the Clerks to distribute the CAYE infographic?

Mr Deputy Speaker: Yes, please. [A handout was distributed to hon Members.]

Mrs Josephine Teo: Let me illustrate how CAYE works. Take for example, Sam, who is a 48-year-old self-employed soccer coach. A Primary school engaged Sam to conduct a two-hour soccer clinic. The Primary school paid Sam $120 for the session, of which $20 was the expense that Sam incurred. Effectively, his income from this session was $100. Under the current contribution model, the school would have paid Sam the full service fee amount of $120.

With CAYE, the school will help Sam make a contribution of $10 for the two-hour soccer clinic. Why $10? Well, this is because Sam has estimated that his income from this job is around $100 after taking out the expenses. Based on his income in the previous year, the MediSave contribution payable is 10% of the income he earns and not the total service fee, which can include expenses. At the same time that it contributes the $10 to Sam’s MediSave Account, the school pays out to Sam the balance $110 for this particular assignment.

We can expect Sam to take on various jobs throughout the year, not all of them with MOE schools. Supposing his net trade income in total is $30,000. He would have to make a MediSave contribution of $3,000. Suppose also that $13,000 of his income came from work done for MOE. By the time the CPF statement arrives, the schools would have helped him contribute $1,300, or 10% of $13,000, throughout the year. And so, as a result, the remaining contribution is no longer $3,000 but a reduced amount of $1,700.

How does Sam benefit from this? I think we can see that his risk of not being able to make the contribution in full is now lower – it is $1,700 instead of $3,000.

Like regular employees, Sam can make smaller and more regular contributions to his MediSave as and when he receives a payment. This is helpful as his income may be seasonal due to, for example, less work during examination periods. CAYE will also help Sam grow his MediSave monies. By contributing earlier, he will accrue more interest on his MediSave contributions.

Some SEPs are more comfortable with the current model of MediSave contributions and may prefer not to be on CAYE yet. 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. Such SEPs can set their CAYE contribution rate to zero.

For SEPs who have not been keeping up with their MediSave contributions, we will continue to give them time to clear their back payments. But it is better that they make contributions through CAYE. This will help them keep up with the current MediSave obligations and prevent their obligations from snowballing.

Let me just make clear a number of things since it concerns CPF.

There is absolutely no change to the obligations of the self-employed for CPF contributions. Even after Parliament passes the amendment, the obligations are the same as before.

The only change concerns how those contributions are made. Instead of a lump-sum payment once a year, small contributions will be made from SEPs' income each time the income is earned. As this pilot only involves SEPs who provide services to the Government, only a fraction will be affected. If these SEPs have in fact been up-to-date with their payments, they can also opt out of the pilot.

As part of our consultations for the Bill, we had in-depth discussions with the NTUC and leaders of the SEP associations. They have generally welcomed the introduction of CAYE and recognise its benefits. However, they are also concerned with some of the SEPs who are already falling behind in payments. Specifically, Mr Ang Hin Kee and leaders from the National Instructors and Coaches Association (NICA), the Professional Photographers Association (Singapore) (PPAS) and the Singapore Association of Motion Picture Professionals (SAMPP) suggested that the Government provide some matching of the SEPs' MediSave contributions when they participate in CAYE. I have discussed with my colleagues and we agree this is a good suggestion. The Government will look into providing some support for SEPs participating in the CAYE pilot.

Some Members may ask if we can extend CAYE so that like regular employees, all of Sam's contributions would have been made as and when he earned an income. Let me emphasise CAYE is a pilot. We have not taken a decision on whether CAYE will be extended to include payments made to the SEPs by private sector companies or intermediaries, such as for insurance and real estate agents. Some of the intermediaries have already indicated interest. They can see the benefit of helping their agents make MediSave payments as and when they earn an income. This is especially if the lump-sum payment happens to be required during a lull period the next year when the agent earns less income. However, let us try out CAYE first, see how well it works and decide later if and how other SEPs can also benefit.

Mr Deputy Speaker, let me now turn to employment practices which are also changing and, therefore, require that we keep pace by updating the CPF Act. We therefore plan to amend the CPF Act to be more responsive to the evolving needs of employers and employees. Let me explain.

Today, employers may structure wage components that are tied to certain contractual obligations. For example, a sign-on bonus with a minimum service period condition. If the employee chooses to leave before the minimum completion date is up, he is required to return the sign-on bonus to his former employer. This practice is allowed under the Employment Act. To restore both parties to their original positions, the employee also needs to return the CPF which his former employer paid on the sign-on bonus. However, the CPF Act does not allow the CPF Board to grant refunds for this repayable component.

Regulations prescribed under the amended CPF Act will give employees flexibility to apply for a refund for the CPF portion within one year of having to return the conditional wage. Employers may also apply for the refund, with the employee's consent.

Let me illustrate with an example. Suppose Daniel receives a sign-on on bonus in January on the condition that he works for one full year. He gets $4,000 in cash and $1,850 in his CPF, which is the contribution on the sign-on bonus. If he so happens to leave his job in March, he has to return a total of $5,850 to his employer. Of which, $1,850 is actually in his CPF account.

Under today's rules, Daniel will be out-of-pocket for the $1,850 as CPF Board is unable to refund this amount from Daniel’s CPF to pay back his employer. With this amendment, Daniel may apply to CPF Board to refund the $1,850 from his CPF account to his employer if he wishes. With Daniel’s consent, his employer may also apply directly to CPF Board for the refund.

Let me state for the record that we neither encourage nor discourage the practice of sign-on bonuses. With the changes, regulations can be made to allow members and employers greater flexibility to accept and offer such payments, knowing they can obtain a refund of their CPF contributions if the payment has to be returned.

The second and final set of amendments provide greater clarity and efficiency in the administration of the CPF Act. I will provide one example.

The Home Protection Scheme (HPS) is a mortgage insurance scheme. It protects CPF members and their families from the risk of losing their home if the breadwinner meets with an unforeseen event, like death. When this happens, it understandably takes some time until the claim is paid. The grieving family will need time to report the claim. CPF Board will need time to process and make the claim payment to the mortgage bank or to HDB in the case of HDB loans. Meanwhile, the interest on the mortgage loan continues to accrue.

In practice, CPF Board has always paid the interest accrued on the outstanding loan all the way until the claim is paid. In other words, families have not needed to make further payments because of the time it took to report and process the claim. This amendment simply regularises this practice in the legislation.

This sums up the key amendments to the CPF Act. Mr Deputy Speaker, I beg to move.

Mr Deputy Speaker, may I also seek your permission to respond to the supplementary question raised by Mr Chong Kee Hiong?

Mr Deputy Speaker: Yes, Minister.

5: 09 pm

Mrs Josephine Teo: I will take this opportunity to briefly talk about changes we are making to the Retirement Sum Scheme (RSS) in response to feedback from Members. I shared in a written Parliamentary reply in October that MOM and CPF Board were reviewing the RSS payout rules. We have completed the review.

With your permission, Mr Deputy Speaker, may I ask the Clerks to distribute a factsheet on the changes to Retirement Sum Scheme payouts?

Mr Deputy Speaker: Yes, please. [A handout was distributed to hon Members]

Mrs Josephine Teo: Although we have introduced CPF LIFE, the RSS is still the main CPF retirement income scheme today. Most members aged 65 and above today receive their retirement payouts through the RSS. More members will start receiving their retirement payouts through CPF LIFE from 2023 onwards, when the first cohort of mandatory CPF LIFE members reaches their payout eligibility age. Members will be automatically included in CPF LIFE if they have at least $60,000 in their Retirement Account at age 65. CPF LIFE will provide them with payouts for as long as they live.

On the other hand, RSS payouts are designed to last up to 20 years from the payout eligibility age. This takes into account the base interest rate earned on Retirement Account savings, which is now 4%. We call this the “base payout”. In 2008, the Government introduced Extra Interest and again in 2016, the Additional Extra Interest. This benefited all members and especially those with lower balances. It was deliberately designed as a progressive move. All this extra interest earned from age 55 is used to stretch the payouts beyond the usual 20 years, up to age 95 at most, to protect members from outliving their RSS payouts. So, the base payouts would have lasted up to 20 years, but with the extra interest, they last longer, can be up to 95 for some members.

We have received feedback from some members who felt that the RSS payout duration of up to age 95 was too long. Designing payouts to last up to age 95 will cover the longevity risk of up to four in five members. In other words, only one in five members is expected to outlive his RSS payout. While this approach is fundamentally sound, it does mean that for the members who had remaining balances in their Retirement Accounts when they passed on, their RSS payouts could have been slightly higher.

We will change the RSS payout computation to address members’ feedback on long payout duration. The key change we will make is to design RSS payouts such that they will last to age 90 at most, instead of age 95. The base payout will continue to last up to 20 years.

Today, all of the Extra Interest and Additional Extra Interest that a member earns from age 55 goes towards extending his RSS payouts beyond 20 years. We will adjust this. Extra interest earned from age 55 until the member starts his payouts will now be used to increase his payout amount. Extra interest earned after the member starts his payouts will continue to extend his payout duration. Moreover, the extension will go to age 90 at most, instead of age 95. Particularly for RSS members whose payouts were originally projected to end past age 90, these changes will increase their payout amounts.

Let me illustrate with an example. Let us say Mr Tan is aged 65 today and starting his RSS payouts. Based on his Retirement Account savings and the current RSS payout rules, he will receive a payout of about $470 for 30 years. His payout duration comprises 20 years of base payouts and an extension of 10 years from the extra interest earned on his savings. In other words, his payouts will end when he is aged 95. Under the new RSS payout rules, his payouts will increase from $470 to $520. However, the payouts will end at age 90.

The new RSS payout rules will continue providing longevity risk protection for up to two in three members. In other words, the majority of members on the RSS will still receive payouts for as long as they are expected to live. For those who prefer a longer payout duration, they have the option of joining CPF LIFE before age 80. This will guarantee that they receive payouts for as long as they live.

Allow me to also add, for avoidance of doubt, that there is no change to the payout eligibility ages or withdrawal rules for RSS members. If you are 65 today, you can start to get your payouts. That remains the same.

I would also like to be very clear that members who are currently receiving payouts will either get the same or higher payouts as a result of these changes to payout rules. No one will see a reduction in the payouts that they are currently receiving.

Separately, we will adjust the RSS payout computation so that when members defer their payouts, or make a top-up, they will generally see an increase in their payout amount.

The changes to how RSS payouts are computed will take effect in 2020. All RSS members who turn 65 from 1 July 2020 will be on the new payout rules.

Let me repeat that there is no change to when they can start their payouts, only how those payouts are computed. As per usual practice, members will receive a letter six months before their 65th birthday. This letter will inform them that they can choose to start their payouts from 65 if they wish.

As for older RSS members who have already chosen to start their payouts under the current rules, we will apply the new payout rules to them from 1 January 2020 if the resulting payout amount is higher than their current payout. Around 60,000 members will see their payouts increase as a result.

To communicate the change clearly to RSS members who have started their payouts, CPF Board will send a one-time letter. Relevant RSS members who are receiving their payouts will receive this letter, which will inform them whether and how they are affected.

To conclude, the changes will see RSS payout duration last to age 90 at most. All RSS members who are currently receiving payouts will get either higher payouts or the same payouts.

Mr Speaker, the CPF Amendment Bill provides workers and employers with more flexibility, in particular, flexibility to adapt to future employment practices. It also clarifies the administration of the CPF Act.

Together with the changes to the RSS payout rules, we are making CPF processes more member-centric. This is not a one-off task. As Members will appreciate, we will have to continue updating the CPF system to better serve the changing needs of its members.

Mr Deputy Speaker: Supplementary questions regarding the Minister's answer to RSS will be taken at the end of the Bill.

Question proposed.

5.18 pm

Mr Patrick Tay Teck Guan (West Coast): Mr Deputy Speaker, Sir, I rise in support of the Bill.

I note that there are several amendments to the CPF Act. However, my focus today would be the introduction or provision of the Contribute-As-You-Earn (CAYE) scheme.

The CAYE scheme is designed to help self-employed persons contribute to their MediSave account as and when they are paid for their work, instead of requiring a yearly lump sum. Starting from 2020 onwards, under the CAYE scheme, self-employed persons will have small and regular contributions made to their MediSave accounts when the Government pays for their services. The Government will transmit the MediSave contributions of the self-employed person to his/her MediSave account. He/she will then receive the balance fee.

In this regard, it is similar to the existing CPF contribution scheme which requires employers to make monthly contributions to their employees' CPF accounts. I also note that the CAYE scheme is presently at its infancy and, at this point, the pilot run is not applicable to the private sector. I am glad to note that the Minister has agreed to consider some form of matching contribution for this pilot CAYE.

While the CAYE scheme is no doubt commendable and a positive attempt by the Government to support freelance and self-employed workers, I have the following questions for the Minister.

First, we note that, at present, the CAYE pilot scheme will only be applicable for Government contracts and there are no plans to extend it to the private sector as of now, during this pilot phase, presumably to ensure that there are no glitches and that MediSave contributions are calculated correctly. My question is: are there plans to extend it to the private sector? If there are plans, when can we expect that it would be extended to the private sector? And does MOM foresee any resistance from the private sector?

Second, I note that, at present, there are approximately 6,000 self-employed persons who provide services directly to the Government and, therefore, stand to benefit from the CAYE scheme. As of last year, I understand that there were approximately 200,000 self-employed persons in Singapore's resident workforce. If the figure of 200,000 remains the same this year, it would mean that only 6,000 out of the 200,000 self-employed persons – about 3% – provide services directly to the Government.

Would the Minister be able to provide some clarification as to why only 3% of the self-employed persons provide services directly to the Government? Is it because the Government generally prefers contracting with bigger and more stable companies with established reputations? In this case, what more can be done to help self-employed persons remain competitive? Or would it be due to the differences in demand and supply of the nature of the services provided by the self-employed persons? Does MOM see the figure of 3% as worrying? In which case, what more can be done? We need to ensure that these freelancers do not lose their rice bowls, amidst the economic uncertainty. What other ways are there which the Government is utilising or considering to support the healthcare and retirement needs of freelancers in Singapore?

Third, we observe that there is increasing fluidity in Singapore's employment landscape. For instance, some freelancers have opted to diversify their careers by picking up regular employment and working as employees by day and freelancing at night, subject to the terms of their employment contracts.

In such a situation, those involved in regular employment by day, would already have the requisite CPF contributions through the employer's plus employee’s CPF contributions needed for the big-ticket items in life, such as housing, retirement as well as healthcare bills and so on.

In this case, would the CAYE scheme still serve its objective of ensuring that these self-employed persons are self-sufficient? Are there considerations for this class of persons to be exempted from MediSave contributions in respect of their freelance work and revenue, to avoid imposing additional financial constraints upon them, especially since the Singapore economy is going through an uncertain period?

Lastly, as a general observation, the CAYE scheme was developed to plug the lacuna in the law and assist self-employed persons with saving monies in their CPF account to tide them through rainy days and fund big ticket items. The root cause of this issue is fundamentally because self-employed persons, or freelancers, are not employees and, therefore, not entitled to CPF contributions to begin with.

However, it is worth highlighting that in some countries, such as Norway and Australia, certain classes of self-employed persons, such as food delivery riders, are now considered "employees" and accorded employees' rights and benefits, including the right to join unions. Perhaps, in due course, it may be time to examine our laws to determine if certain classes of freelancers should be accorded "employee" status and the associated benefits, especially where their contract for service resembles an employment contract. Perhaps, a good starting point would be to allow freelancers to be covered within the scope of the Trade Unions Act. Sir, my clarifications notwithstanding, I stand in support of this Bill.

5.24 pm

Mr Ang Hin Kee (Ang Mo Kio): Mr Deputy Speaker, Sir, I recently took an MRT ride with a freelance trainer and, a few weeks later, I had lunch with another freelance coach. Both of them shared a similar story with me, about the need to use hand sanitizers regularly. So, I was curious as to why they said that. And it is so coincidental that both asked me the same thing.

I guess the reason they gave me was that, as a freelancer, you have to look after your health and make sure you do not fall sick. Other than the fact that you may have to pay medical bills, recuperate at home, but you also may miss out on fulfilling your clients' obligations that you promise to deliver. That is about taking personal ownership – looking after one's health, buying appropriate insurance, topping up your MediSave account and exercising regularly.

In fact, over the last few years, Mr Deputy Speaker, I have met with many freelancers – sports coaches, tutors, actors, movie-makers, band instructors, those who do rigging in stages and outdoor events, emcees, photographers, beauticians, choir instructors, orchestra directors, fitness instructors, translators, taxi and private hire drivers, getai performers. This is just to illustrate the wide spectrum of industries and vocations that many of our freelancers today come from. It is no longer the traditional tutors and taxi drivers alone. Many of them shared with me that they do adopt a healthy lifestyle and exercise regularly, contribute to their MediSave account. Some even bought prolonged medical leave insurance to cover potential loss of income should they fall sick or recover from some major surgery.

As the Minister rightly pointed out earlier, 60% of them do not do so. And this is especially so among younger job entrants who just became freelancers. I spoke to many of them and they shared that they think that this is only a transition job; it is not something that they will hold on to for a long time.

Making MediSave contributions are not at the top of their mind among these young freelances. In fact, in my engagement with the CPF Board, I also learnt that many experienced freelancers are also not prompt in making MediSave contributions even though there are instalment plans made available with the CPF Board. And the Minister had earlier also alluded to the same facts. The reasons may be varied, Mr Deputy Speaker, but the outcome is the same. Freelancers run the risks of inadequate medical provisions.

So, what are we to do about this? How do we help to place them under the safety net that every other employed worker is provided for? Some argue that freelancers, "You are independent. Look after yourself. Make the necessary provisions." Others ask for more Government interventions.

With this amendment, I think the role that the Government is taking on is clear.

First, as a responsible service buyer, the Government wants to help freelancers make contributions to their MediSave accounts so that they can have adequate savings for medical needs through the CAYE scheme.

Secondly, it is also imperative that the Government ropes in all Singaporean workers to come under its CPF safety net in an efficient and effective manner. I am, therefore, supportive of this amendment. I have three requests for the Government's consideration, of which, the Minister has already answered one.

First, I hope that the Government can be more proactive in supporting freelancers beyond the CAYE. The emerging gig economy is something that we are all aware of and it has created a new form of employment among many workers. One key concern is that there may be risks that may be passed on from companies to these gig workers who actually are unable to take on much risks, such as instability in their wages and not being prepared for retirement. My hon colleague Mr Patrick Tay also alluded to the fact that food delivery drivers may fall into this category of workers who may be unaware of the risks.

For instance, I have also mentioned in my previous speeches that we, too, see many freelancers doing food delivery. Although they wear the attire of the platform provider and comply with rules quite similar to that of an employee, they are being classified as freelancers. I know that the Ministry has a WorkRight programme to ensure that those mis-classified workers will be put right and be clocked back as far as CPF and other statutory rights are being provided for.

However, do we need to, therefore, relook whether there is a need to re-categorise the different types of freelancers, identify those who are more vulnerable and ascertain to see if they need to be provided and protected by the law? Whilst we want to retain the flexibility of a gig economy, we should also review the way we define who is an employee in view of today's new employment arrangements.

Secondly, many freelancers are already making their MediSave contributions to an instalment plan. And I am glad that the Minister has earlier mentioned and announced that the Government is seriously considering a support system to the MediSave contribution of freelancers who transact with Government entities. This is a welcomed announcement.

There is, Mr Deputy Speaker, already a precedent among taxi operators who co-contribute to taxi drivers' monthly MediSave contributions, that is, the Drive and Save (DAS) scheme. So, this announcement by MOM will definitely help freelancers transit to this new arrangement and I look forward to the details of the support.

Thirdly and finally, I would like to urge that the Ministry look at enhancing training support for freelancers. This should address the training needs of not just freelancers who transact with Government buyers, but more importantly, the employability of all freelancers. I mentioned earlier, some young freelancers shared that they started off freelancing, thinking it is a transition job but there are other older freelancers who also thought that it was a transitional job, but over time, it became their only full-time choice. This is because even if some struggle to improve their wage prospects or income doing freelance work, they do not possess the adequate skills to move to other jobs.

In the Ministry's regular survey, I hope statistics can be collected pertaining to the training status and employability of our freelancers. This is to ensure we roll out timely interventions before the employability gap grows larger. Meanwhile, can we consider supporting them in their training endeavors with funding help in the form of training allowance or absentee payroll that we offer other workers?

Mr Deputy Speaker, we need new solutions and I am very glad that the Ministry has already roll out a programme like the CAYE. Such new solutions are needed even as we address the unintended consequences of this new form of employment. This will ensure that freelancers do not unnecessarily struggle with employment or employability options. Mr Deputy Speaker, I support the Motion.

5.32 pm

Assoc Prof Daniel Goh Pei Siong (Non-Constituency Member): 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 hon 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% of wages employees are compelled to save and the 17% 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% 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% of their income up to the monthly contribution ceiling of $6,000 through the Contribute-As-You-Earn scheme. The Government could incentivise 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% to 10% 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 hon 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?

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.

5.42 pm

Assoc Prof Walter Theseira (Nominated Member): Mr Deputy Speaker, Sir, this Bill is the result of a 50-year journey towards greater social protection for the self-employed through the Central Provident Fund scheme. Today, self-employed persons (SEPs) are only required to contribute to MediSave. Contributions to other CPF accounts are voluntary. When this Act is passed, we will be able to help SEPs contribute to CPF through the Contribute-As-You-Earn or CAYE mechanism.

I will cover two broad issues in my speech: First, the legislative history of how SEPs are treated in the CPF Act and second, the economic reasons why this amendment is necessary, timely and should spur us to providing even greater coverage of SEPs through CPF, beyond Medisave contributions, in the future.

I will start by highlighting a key change in the primary legislation. The present section 77(1)(e) provides the Minister with the discretion to require SEPs to contribute to CPF. This is the legislative basis for regulations requiring SEPs to contribute to MediSave. This will be replaced by the new section 9A, which states that SEPs must contribute to CPF. To support CAYE, the new section 9B requires collectors who engage and pay SEPs to make contributions to CPF on their behalf. Clauses in section 9C amongst others provide the Minister with discretion in how this will be implemented.

At first, this would appear to be a substantive policy change. It is a shift in the primary legislation from stating that SEPs may be required to contribute to CPF, to stating that SEPs must contribute to CPF. But in fact, a reading of the legislative history of section 77(1)(e) shows that Parliament has always intended for the self-employed to be covered by CPF. Fifty-one years ago, in 1968, then Minister for Labour Mr S Rajaratnam first proposed the idea of covering SEPs through CPF. The present section 77(1)(e) originates in the CPF (Amendment) Bill No 26/1968.

In the second reading debate on 1 August 1968, Mr Rajaratnam stated, and I quote, "The principal purposes of the Bill are… (iii) to enable the provisions of the Central Provident Fund Ordinance to be extended to cover persons who are self-employed and who do not at present contribute to the fund." He went on to say that the necessary regulations to effect this would be made in due course. It appears clear Parliament intended in 1968 that CPF should compulsorily cover SEPs.

Unfortunately, between 1968 and 1992 we appear to have lost the momentum to cover SEPs through CPF. As far as I can tell, no policy required SEPs to contribute to CPF during those years, although the text of section 77(1)(e) was amended in 1973 to the present format.

It was only in 1992 that SEPs were first required to contribute to CPF, for MediSave only. The CPF Act was then amended to provide for administering SEP MediSave contributions, including penalties for non-compliance. In the Second Reading debate on 31 July 1992, Mr Chiam See Tong asked why SEPs were asked to contribute to MediSave only, when the original purpose of CPF was to provide for old age protection in general.

Then Minister for Labour, Dr Lee Boon Yang replied, and I quote, "We are only extending this contribution to the CPF by the self-employed for Medisave at this present moment. In fact, we would like to encourage all self-employed persons to contribute to the other accounts in the CPF, that is, the Ordinary Account and the Special Account. I am very pleased that Mr Chiam supports this move. In due course, perhaps we can take up his suggestion and move in the direction to extend the entire CPF scheme to all self-employed persons."

I note that the CPF Act did not need to be amended in 1992 in order to require SEPs to contribute to MediSave. The subsidiary legislation was enacted on 1 July 1992 under section 77(1)(e) and predates the second reading of the CPF Act that year. So, the powers under section 77(1)(e) have always been sufficient to require SEPs to contribute to CPF.

So, what are the lessons for us? First, I think the difference in the framing of the primary legislation does matter. Section 77(1)(e) only says that SEPs may be required to contribute. There is discretion provided to the Minister. The new section 9A in this Bill says that SEPs must contribute. In retrospect, the original discretionary framing of section 77(1)(e) may explain why we took 24 years, from 1968 to 1992, to require SEPs to contribute to MediSave. Section 77(1)(e) does not impose any requirement to act, even though the Parliamentary intent to cover SEPs with CPF was clear in 1968.

Second, I think we should be cautious about framing this amendment narrowly as limited to SEP contributions to MediSave through the CAYE mechanism. The 1992 second reading resulted in this narrow policy position. But in reality, the Parliamentary intent in 1968 was to for SEPs to be covered by CPF in general, and, of course, MediSave did not even exist back then.

Third, I urge Parliament to affirm that one part of the intent of this Bill is to permanently have SEPs contribute to CPF – that is the plain reading of section 9A – with the appropriate discretion to Government in terms of how this is to be implemented over time.

I have heard the Minister’s opening speech and I acknowledge that the Government’s policy position has not changed. SEPs are only required to contribute to MediSave. Nonetheless, I believe we must aim for broader coverage and protection for SEPs in the goodness of time. We do not want, I think, another 24 years to pass where no progress is made on SEP CPF coverage, at least not without good reasons. Otherwise, we might as well just limit this CPF (Amendment) Bill to MediSave contributions only, if there is no intent to eventually move towards full CPF coverage of SEPs.

I will now turn to the economic reasons supporting this Bill. Sir, according to MOM’s Own Account Workers Survey, there were 190,900 residents engaged in own account work or self-employment as their primary job in 2017. If you look at the profile you will find that they are generally older and less educated; slightly more than half are aged 50 and above, and 60% have less than tertiary education. Actually, relatively few work in the so-called gig economy; most are taxi drivers, insurance and real estate agents, and other traditional self-employment vocations.

Sir, I will set aside for now the problem of SEPs who earn very low or intermittent incomes and who, as a result, have difficulty setting aside any funds for social protection. The solution for them must be improving non-contributory social protection schemes such as the Workfare Income Supplement Scheme, and of course skills upgrading. The CAYE scheme is not their remedy.

My interest is in SEPs who have the earning capacity to contribute to their own social protection. In 2017, nearly 60% of primary own account workers earned more than $20,000 a year, and 40% earned more than $30,000 a year. Employees who earn such incomes are able to contribute for their own CPF. So, the CAYE scheme must eventually give such higher-earning SEPs the same coverage that employees obtain from CPF today.

The basic reasons why SEPs should be covered by CPF are the same as that for employees. There are behavioural biases which make it difficult for us to set aside funds for our retirement and future needs. We may want to save for the future, but we face self-control problems, so spending money today always seems easier than saving money for tomorrow. We may be loss averse, so taking money out of our pockets and locking it away as CPF savings is psychologically difficult.

What makes saving uniquely difficult for SEPs is that they receive income today, but must pay CPF contributions tomorrow. CPF assessments are finalised based on the preceding year’s Net Trade Income. This means that by the time CPF contributions are assessed and due, SEPs have long since received their income. They may have cash flow problems. They may believe that CPF contributions are an out-of-pocket loss. Employees, by contrast, do not have this problem. Because their CPF contributions are deducted from salaries at source, employees do not experience the same cash flow problems, or the same sense of loss, as SEPs do. The CAYE mechanism will overcome these problems.

There is an additional broader economic benefit of CAYE. Today, SEPs earn higher take-home wages than employees for doing the same kinds of work. For example, taxi drivers may receive higher take-home incomes than bus drivers do. This is not just because of differences in the cost structure of SEPs, such as the lack of employee benefits. The main reason is that CPF contributions reduce the take-home income of employees. Of course, an employee’s total wages, which includes CPF contributions, may, in fact, be higher than that of an equivalent SEP. But it is natural for workers to make decisions based on take-home wages, since this can be spent immediately.

This wage differential between SEPs and employees in equivalent work may distort the labour market. It may explain why so many Singaporeans have found gig economy jobs attractive in recent years. It contributes to the ease with which such gig economy platforms recruit workers away from traditional employment. It may also encourage an unnecessary and inefficient shift in the labour market towards self-employment, especially if firms have a lower wage bill for SEPs because they can get away with paying less, and still pay higher take-home wages – there is no CPF contribution to deduct. CAYE, when implemented, will reduce the gap between SEPs and employees in take-home wages, and will help to reduce the effect of this important distortion in wages.

However, there is also potential for CAYE to be applied more creatively to help our SEPs contribute to CPF and manage their finances. A common problem with SEPs is that they face highly variable incomes. For example, an external school sports coach for our schools may have to conduct training sessions continuously in the run-up to competitions but have low demand for their services during exams. Our taxi and private-hire drivers have large differences in daily earnings depending on the weather, weekends and public holidays, and so on. This is a problem of feast or famine. While employees enjoy a steady income, SEPs are exposed to peaks and troughs in income.

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. Consider a full-time private hire driver. She might earn just enough to cover expenses on bad days. It would not be practical or desirable to levy CAYE contributions then. But on good days, she might earn enough profit that she would gladly contribute to CPF to save for the future. A well-designed CAYE could allow SEPs to contribute to CPF with significantly less pain than a flat contribution rate would.

This concept is built on proven research and practice. The Nobel-prize winning behavioural economist Richard Thaler, together with Shlomo Benartzi, proposed a similar programme called “Save More Tomorrow” that asks people to commit to saving more out of future income, rather than present income. In a paper published in the Journal of Political Economy in 2004, they found that offering the chance to save for retirement starting with future pay raises, rather than present income, substantially increased both participation in retirement savings, and savings rates. However, the concept must be adapted to the needs of SEPs. Singapore can take the lead in showing that we can sustainably provide social protection even for gig economy workers and other emerging types of employment in the future economy.

Mr Deputy Speaker, Sir, this CPF (Amendment) Bill will significantly improve social protection for self-employed persons. I urge Parliament to affirm that we should move eventually towards full coverage of self-employed persons through the CPF system. I support the Bill.

5.56 pm

Mr Deputy Speaker: Yes, Mr Ang Hin Kee.

Mr Ang Hin Kee: Mr Speaker, Sir, can I make a point of clarification?

Mr Deputy Speaker: Yes. What is it regarding?

Mr Ang Hin Kee: It is for the hon Member Assoc Prof Daniel Goh. It is on a point which he made earlier. I just wanted to check if I heard it correctly and get some clarification from him.

Mr Deputy Speaker: Please go ahead.

Mr Ang Hin Kee: Assoc Prof Daniel Goh earlier mentioned that some employers of, for example, taxi operators, and the likes of it, provide some kind support and maybe even uniform to the drivers, who therefore, they should be classified as employees and given statutory protection such as CPF contributions and the likes of it. I wonder if that is correct? If that is correct, would the operators today be alarmed that what they did voluntarily – which we had persuaded them by saying: can you co-contribute to the MediSave of the taxi drivers; can you provide subsidies for their uniforms – would now change and they should therefore make them their employees and start granting them paid leave, changing the entire model from a freelance one to an employee model. This is because that will fundamentally change the structure of the taxi industry from one where the majority are freelancers to one where these freelancers are employees.

Mr Deputy Speaker: Are you rebutting him?

Mr Ang Hin Kee: I would like to have his clarification on whether that was a suggestion from him in the speech he made earlier.

Mr Deputy Speaker: Okay, Assoc Prof Daniel Goh.

Assoc Prof Daniel Goh Pei Siong: Thank you, Deputy Speaker. I am not alluding to taxi companies because they are not platform companies, so to speak.

I am talking about the case of Australia where because of the gig economy and the use of online technologies and platform engagement technologies, there are certain features that come of that, in which self-employed workers start to look like employees because of certain kinds of incentives and membership-tiering, and all these kinds of features, and also the kind of conditions that are being placed on the self-employed workers to adopt. So, the direction and the dependency on the companies' control and direction is an important criteria in judging whether these are actually employees and not contract workers. That is the test of dependency. I am not really talking about current taxi operators and what not, but platform companies.

Mr Deputy Speaker: Yes, Mr Ang.

Mr Ang Hin Kee: One further point of clarification. Grab and Gojek and the likes of Uber are platform operators. When they came into the Singapore scene, we spent quite a lot of time to persuade them to co-contribute to the MediSave; to find ways to support them in their training; to support them for their healthcare needs although they are freelance drivers. They know for a fact that they are freelancers, but these platform operators actually provided support because we persuaded them to do so and they saw the logic of doing so. So, is Assoc Prof Goh suggesting that these platform operators, such as Gojek and Grab, therefore treat their drivers now as employees?

Assoc Prof Daniel Goh Pei Siong: Deputy Speaker, Sir, I am suggesting that the Government consider the use of the test of dependency to look at the classification of the self-employed workers to see whether they fit into certain models of employment and I do not think that is very different from what you have actually called for yourself.

Mr Deputy Speaker: Do you want to ask him for more clarifications or are you answering his query?

Mr Ang Hin Kee: I just want to clarify his interpretation of what I called for.

What I called for is that there are certain groups of freelancers, for example, food delivery riders, who are asked to come at certain hours, take the equipment, wear the uniform, and do the work as though they are employees. But the same platform operators, whether Grab or Gojek, also offer options whereby drivers become freelancers. So, the same platform can, on the one hand, offer people genuine bona fide freelance arrangements, but because they were persuaded to and gladly make some contributions to the riders in order that they work with you on a long-term basis and they gladly do so, but we do not consider them as employees. For riders doing food delivery, that is something which I called for, indeed.

Mr Deputy Speaker: I think this is an interpretation of the term "employment" by the Courts, so we will leave it to the Courts or MOM to make a decision on it. Can I have the next speaker? Mr Arasu.

6.00 pm

Mr Arasu Duraisamy (Nominated Member): Mr Deputy Speaker, the main focus of the proposed amendments to the Central Provident Fund Act is to introduce the Contribute-As-You-Earn scheme or CAYE for short. If executed well, CAYE could be a welcome step in streamlining the payment contribution process to MediSave for Self-Employed Persons (SEPs) and helping SEPs better manage their cashflow.

This is a timely amendment and answers a key concern of SEPs, who do not have the certainty of finding consistent work and face more difficulties than the average salaried employee in saving regularly for their healthcare needs.

While SEPs’ MediSave contribution rates remain the same, CAYE changes the payment process itself by having service buyers contribute regular payments to MediSave on SEPs’ behalf. To ensure that SEPs are not made worse off by the introduction of this system, we must exercise care in operationalising CAYE.

We need to make sure that the CAYE system is understandable and easy to navigate for SEPs. Details of the payment process and even the online interface for payments must be made simple and clear, for both SEPs and service buyers.

At the same time, the educational outreach to SEPs and service buyers must be effective, in order to make the transition as smooth as possible. In the pilot phase, outreach can be focused on SEPs and Government Procurement Entities (GPEs). However, in future phases where more SEPs may be affected, we need to ensure that the outreach extends to SEPs and service buyers in different industries and through different channels.

Also, affected SEPs should be consulted before the launch of CAYE in each phase, to ensure that the process is understood and pre-emptively iron out any potential wrinkles that may be highlighted during the consultation.

SEPs have widely different relationships with their clients and have different degrees of dependence on intermediaries. Also, SEPs can be paid per task or have their payments contractually scheduled over a period of time. This means that CAYE may not work as well or in the same way for each group of SEPs. To ensure a high level of compliance, consultations should be held with as many different types of groups as possible prior to implementation. MOM should also consider creating a one-stop resource to provide relevant information and to allow SEPs to submit queries relating to their CAYE contributions.

Some SEPs have expressed concern about CAYE potentially increasing existing delays to payments owed to them, due to the additional logistical arrangements that need to be made by the service buyer. I understand that the CAYE payment process is meant to be easy and automated, so service buyers should not have to use CAYE as an excuse to delay payments. Will MOM consider introducing penalties for undue payment delays, to encourage prompt payments by service buyers, and GPEs in particular for the pilot phase?

I have another question. I understand that the pilot phase will allow companies in private sector to voluntarily adopt the CAYE scheme. How about individual SEPs? Some SEPs who are not within the pilot phase may want to participate voluntarily as they see this system as beneficial for their MediSave needs. Will these SEPs able to sign up for CAYE and compel their service buyers to opt in to this system for them?

Beyond CAYE, more can be done to support SEPs holistically. I have previously advocated for the compulsory provision of work injury insurance by service buyers to ensure that SEPs have recourse if they suffer injuries in the course of their employment. There are some notable examples of private companies who provide prolonged medical insurance for the SEPs working on their platforms. More can be done to encourage service buyers to provide insurance coverage for SEPs, as this promotes healthy sustainability and even growth for the industry.

Even if SEPs end up with the responsibility of procuring insurance coverage for themselves, we need to help responsible SEPs who purchase such insurance guard against undercutting by peers who do not. This is particularly relevant in higher-risk occupations. Service buyers and GPEs should be encouraged to factor such costs in, to minimise undercutting and provide a more level playing field for SEPs.

To conclude, Sir, I hope CAYE is mobilised effectively, to make the transition painless and help every SEP better save for their own and family members’ healthcare needs.

While the principle of personal responsibility remains key for SEPs who have chosen this path, we can and should strengthen our support for SEPs, to help make self-employment sustainable and to celebrate the contributions of this diverse and dynamic group of workers in the Singapore economy.

We will continue to advocate for the institutional support for SEPs because every worker matters. I stand in support of the Bill.

6.06 pm

Mr Zainal Sapari (Pasir Ris-Punggol): Mr Deputy Speaker, in Malay, please.

(In Malay) [Please refer to Vernacular Speech.]: I support the proposed amendments to this Bill, which will ensure that the CPF system remains relevant to the changes in the job landscape and employment practices.

There are many challenges faced by freelancers or self-employed persons, who are estimated to number around 200,000. Many shared that their top worry is whether they can find enough work and having income stability. In fact, one out of four self-employed persons is unable to keep up with their obligations to contribute to their MediSave account annually.

I welcome the amendments that will help about 6,000 self-employed persons who provide services to the Government to make automatic MediSave contributions through a Contribute-As-You-Earn (CAYE) scheme. I have a number of questions.

Firstly, some of them may have difficulty making this contribution, as it would affect their income. Would they be given assistance, particularly those who have payment arrears?

Secondly, would MOM allow this group to voluntarily opt-in if the self-employed persons in a specific industry collectively agree to participate in this scheme even if they are providing services to the private sector?

Thirdly, would there be incentives provided to encourage this group to make their MediSave contribution?

On the CPF Retirement Sum Scheme, could MOM share the reasons why it could not give members the option of choosing the CPF payout duration? Are there members who wish to shorten their CPF payout duration in order to receive a higher monthly payout to pay for their daily expenditure?

(In English): Mr Deputy Speaker, notwithstanding my queries and suggestions, I support all the amendments to the CPF Act and the update to the CPF Retirement Scheme.

6.09 pm

Ms Jessica Tan Soon Neo (East Coast): Mr Deputy Speaker, in Singapore, over the last 10 years, the trend on the number of self-employed persons (SEPs) that make up the resident workforce is between 8% and 10%. This number is not large but with increasing digitalisation of the economy and the technological disruptions, employment practices are changing and this trend could shift.

The Tripartite Workgroup's (TWG) Recommendation on Self-employed Persons cited autonomy as the reason that "some 80%" of SEPs in Singapore have chosen self-employment over being a regular employee.

SEPs are their own bosses. The attractiveness of being your own boss and reaping the rewards when you succeed does come with a set of challenges and the focus of today's Bill, while there are other challenges like business risks and all that that SEPs face together, with the regularity of income, the focus of today's Bill is on the healthcare and savings for retirement.

Clause 5 of the Bill seeks to amend the Act to provide for the Contribute-As-You-Earn (CAYE) Scheme. This will allow for certain persons called "collectors" making revenue payment to self-employed persons to be required to make contributions to the CPF funds of self-employed persons as outlined in the new section 9B.

While I am supportive of the Amendment, I do have some comments and clarifications with regards to the CAYE Scheme.

The Minister announced that the CPF Pilot for CAYE will start in January 2020 with SEPs providing services directly to the Government or the public sector. This will impact some estimated 6,000 SEPs. This will help this group of SEPs providing direct services to the Government or public sector make smaller and regular contributions to their MediSave, and as such when these payments are made when the SEP receives payment for his or her services. This will minimise the risk of the SEPs of not being able to make lump-sum contributions on an annual basis. So, for the contributions made, there will also be more MediSave Account interest earned.

There is however a very short time for SEPs providing services to the Government or the public sector to plan for this change as January 2020 is less than two months away. Some SEPs may face transitional cashflow impact. Will there be any assistance provided to SEPs if required and how? Minister did say that those who have kept up with their MediSave contributions or the installment plans for their MediSave contributions will be given the option to opt out of the Pilot and I assume if they wanted to to start later.

But for those who do have difficulties, what help would be provided? As previously reported, one in four self-employed persons has not kept up with their MediSave obligations annually. For the SEPs who are facing financial difficulties and are unable to make contributions for the outstanding amounts to their MediSave, the Minister did mention that some help will be given for those who are behind in their contributions to catch up. Can Minister elaborate what help this would be because they were not be given the option to opt out?

SEPs are a very diverse group. Feedback received from self-employed persons during the Tripartite Workgroup public consultation identified lack of CPF savings for healthcare and retirement needs as one of the common challenges faced by SEPs. The CAYE Scheme, I believe, is a practical way to support SEPs address this challenge. So, if the CAYE Pilot Scheme does prove effective in supporting SEPs make regular MediSave contributions, when will the scheme be extended to the private sector? Mr Deputy Speaker, notwithstanding my clarifications and comments, I do support the Bill.

Mr Deputy Speaker: Minister Josephine.

6.14 pm

Mrs Josephine Teo: Mr Deputy Speaker, let me thank the Members for their comments and for supporting this Bill. I also want to thank Assoc Prof Walter Theseira in particular for his extensive research that allowed him to share a very interesting piece of legislative history concerning intent for self-employed persons. I must say that Members' enthusiastic comments are going to make my response a little longer than I originally expected.

Some comments, of course, perhaps, are not directly related to this Bill. I invite Members to file Parliamentary Questions so we can address them properly. One of Assoc Prof Daniel Goh's questions was recently addressed by my colleague, Minister of State Zaqy Mohamad, during the debate on Work Injury Compensation Act. I believe the Member did not speak on the Act but he had quite a lot of questions there and they have also been addressed, so I shall not repeat them.

Let me now turn to the comments related to this Bill. Members of the House have acknowledged that the Contribute-As-You-Earn pilot will help SEPs meet their MediSave obligations more easily through smaller and more regular contributions.

We continue to work on addressing other common challenges faced by SEPs, as identified by the Tripartite Workgroup on SEPs in 2018.

Member Mr Arasu raised the point on payment delays. These and other payment-related disputes can happen because of unclear contract terms. As such, we have launched the Tripartite Standard on Contracting with SEPs to reduce payment-related disputes. We also introduced a template on the key terms of engagement to shape contracting norms.

Assoc Prof Daniel Goh seemed to dismiss the number of companies that have already signed on to this standard. I would humbly remind him that actually sometimes the buyers of services of SEPs are individuals like you and me – the plumber that comes to the home, someone who does an odd job.

If we think about it, actually, it would be quite unrealistic to expect individual service buyers to sign on to the Tripartite Standard. The fact that already so many service buyers have come on-board is not a small step that has been accomplished. Of course, we will continue to build on it but I hope he will not dismiss it too lightly. There is a lot of effort involved, and if he would like to get involved with promoting it, we welcome it too.

In addition, we have supported the development of skills training, both technical and non-technical, for SEPs. Relevant Skills Framework that SkillsFuture Singapore puts out now take into account the needs of SEPs.

To protect SEPs from the loss of income due to prolonged illness or injury, we have worked with insurers to introduce prolonged medical leave (PML) products.

I am pleased to update both Mr Arasu and Assoc Prof Daniel Goh that close to 30,000 SEPs are now covered by PML insurance. Keep in mind that this product is relatively new to the market. So, 30,000 is really not a bad start. This is already about half of those in occupations like private-hire car drivers and taxi drivers.

As to whether the take-up can increase, certainly, we will be keen to promote it. But we have to leave it to the SEPs to decide for themselves whether and to what degree self-employment is their main source of income, for which PML protection is important. Keep in mind that quite a lot of them have other sources of income. Also, for some of the SEPs, it will always be the case that they assess that their risks are very low and they would rather not have to incur the upfront costs of PML.

To complete the follow-up to the Tripartite Workgroup's recommendations, we are now piloting CAYE. The pilot allows us to try out this new system among a small group of about 6,000 SEPs, gather feedback from users and iron out any glitches, as Mr Ang pointed out.

Mr Patrick Tay, Ms Jessica Tan and Mr Zainal Sapari asked if CAYE could be extended to the private sector. Mr Arasu asked if they can volunteer instead. Currently, there are no plans to extend CAYE to the private sector. We can decide later, depending on the results of the pilot. But those who wish to volunteer are welcome to approach us to explore.

Similarly, we can consider Mr Patrick Tay's suggestion to explore extending the scope of the Trade Unions Act to SEPs if supported by the associations.

Assoc Prof Walter Theseira is in favour of extending compulsory CPF contributions to Ordinary and Special Account savings. But he also said in the goodness of time, but not 24 years. As I was listening to him, Assoc Prof Daniel Goh's expression of concerns about SEPs' retirement adequacy came to mind, and I wondered if he or the Workers' Party has a view on Assoc Prof Walter Theseira's suggestion. Does the Member also feel that in order to boost retirement adequacy for Self-Employed Persons, he would support and would call for the extension of their contribution obligations to the Ordinary as well as the Special Account? It would be interesting to hear from the Member, since he expressed a concern about SEPs' retirement adequacy.

I should say that, currently, the Government has no plans to extend CPF contribution obligations for SEPs to the Ordinary and Special Account. However, we will continue to encourage voluntary CPF contributions from SEPs. Assoc Prof Daniel Goh's suggestion on incentives to boost retirement savings is really not new, it is something we have been studying and I hope to be able to give Members an answer in the goodness of time.

Ms Jessica Tan, Mr Zainal Sapari, Mr Ang Hin Kee, the Labour Movement and leaders of the SEP associations suggested providing support for SEPs when they participate in CAYE. As I had said earlier, the Government is studying their suggestions seriously and will provide more details when ready.

Ms Jessica Tan and Mr Zainal Sapari also raised an important concern that SEPs may face cashflow constraints as they transition to this new scheme. We will allow SEPs to opt out if they have been keeping up with their contributions. For the small group of about 600 affected SEPs who are not keeping up, CAYE will certainly help them to avoid snowballing arrears. If any one of them needs additional support, we are prepared to help based on the specific circumstances. We can, for example, look at their instalment plan and see whether there is room to stretch it out.

Mr Patrick Tay, Assoc Prof Daniel Goh and Mr Ang Hin Kee raised the question of whether SEPs can be reclassified as employees, if I heard the Members correctly. Let me just explain that the Singapore Courts have given clarity on determining whether an individual is an employee or a SEP. The difference is Contract of Service or Contract for Service. Those are the technical references.

Some of the factors used by our Courts include the degree of control exerted by the company and its ability to decide on the hours of work. I think the concept is not very different from dependency.

MOM has applied this approach to determine the classification of work arrangements. For example, MOM reviewed the contract arrangement of online matching platforms such as food delivery riders from Deliveroo or FoodPanda. Based on the factors spelt out by the Courts, the workers were assessed to be self-employed. But as Mr Ang pointed out, depending on actual work arrangements, some of these workers could be employees too. So, the employees and the SEPs can co-exist on work that look very similar. We really need to drill down into the specific work arrangements and we are committed to doing so.

In cases where employees have been misclassified as "Self-Employed Persons", please be assured that we will take the employers to task. In one case which we handled recently, a transport and logistics company was issued with a stern warning and had its work pass privileges suspended for misclassifying its driver as an SEP. Based on our investigations, the driver was in effect an employee because his employment terms indicated an employer-employee relationship in terms of the amount of control that the company exerted. The company was asked to rectify and pay back the worker what he was due, including CPF contributions.

Mr Patrick Tay asked about the number of SEPs who provide services to the Government. SEPs tend to be concentrated in certain industries which Government does not regularly procure services from, for example, real estate agents and insurance agents. So, the 3% should not be considered alarming in any way.

Mr Tay also asked if SEPs who are concurrently employees are still required to make CAYE contributions. Well, they are actually no different from people who hold two employee jobs. The employee will also make two streams of contributions from the two jobs. Keep in mind, however, that for all members, there is a cap on total CPF contributions. SEPs who are concurrently regular employees will not need to contribute beyond this cap if they make an application to CPF Board. So, if they want to cap it and treat it as though he was one regular employee only, they can apply to do that.

We will also study Assoc Prof Walter Theseira's suggestion on allowing SEPs to vary CAYE contribution rates according to their income peaks and troughs. I must say that I find that a very interesting idea. Let us study how we can implement it.

To summarise again on CAYE, there is no change to the CPF obligations of SEPs. We are simply breaking up the contributions into smaller, more manageable parts as and when the SEPs earn. Only a small proportion of SEPs are part of the pilot. These SEPs can choose to opt out and set the CAYE contribution rate to zero if they have contributed to their MediSave in full or are keeping up under an instalment plan. We have also not taken a decision whether to extend CAYE any further.

Let me deal with other feedback. We will always welcome feedback on how to make our CPF system better. Therefore, I would like to thank Members of Parliament who shared their feedback on the Retirement Sum Scheme (RSS).

Mr Zainal Sapari asked if members could have the option to end their payouts even earlier than what it is today. We are primarily guided by life expectancy. Shorter payout durations mean higher payouts but this comes at the expense of increased risk of outliving those payouts.

In 2018, more than half of Singapore residents aged 65 were expected to live past 85 years old. This means that if RSS payouts ended just after 20 years, at age 85, more than half – the majority – of RSS members may have no CPF payouts for their remaining lives.

In comparison, extending RSS payouts until age 90 at most will protect up to two in three members from outliving their payouts. This provides a reasonable level of assurance for members, while still increasing their payout amount as compared to the current RSS rules. Members also have the option of joining CPF LIFE before the age of 80 if they are personally worried about outliving their RSS payouts.

To Members of the House, I seek your help to reassure your residents of the following, that there is no change to when they can receive their RSS payouts. Those who are 65 today can instruct CPF Board to start their payouts anytime. With the new rules, members already receiving RSS payouts will either get the same or higher payouts. No one will get a lower payout than they are already receiving. Members who are on CPF LIFE will not be affected at all and will continue receiving monthly payouts for life.

Mr Speaker, let me say something about helping members understand how CPF works for them. The CPF caters to 3.9 million members. 150,000 employers interact with it regularly. Each member and employer is unique.

Most members at different times of their lives interact with CPF Board on housing, healthcare and retirement matters. They may also use their CPF savings for investment, education and insurance. On top of all that, members may be included in the many Government schemes administered by CPF Board on behalf of other agencies. Such schemes include the Workfare Income Supplement, Silver Support Scheme, MediShield Life, GST Vouchers and so on.

At the same time, CPF rules have to evolve to stay relevant. Quite often, new rules have to co-exist with old ones to honour commitments to older members. As a result, even when family members compare notes, they may get confused.

Let me assure members that CPF Board is constantly striving to communicate better.

This is done at three levels: through mass media channels; segmented outreach; and direct personalised communications.

First, mass media. CPF Board uses multiple media channels to reach out to as many Singaporeans as possible and increase their understanding of CPF. The Board conducts regular campaigns, including in vernacular languages to clarify details of schemes, such as nominations and top-ups. The Board also uses social media to share bite-sized information with followers. Besides Facebook and Instagram posts, video series explain retirement issues in a light-hearted, easy-to-digest manner.

Second, segmented outreach. The Board tailors its content to the needs of various groups. Ground outreach in the heartlands is especially important. For example, many of us would have seen CPF Board's Retirement Planning Roadshows in our neighbourhood centre or mall. These roadshows are held over five weekends across the island. This year alone, the roadshows received about 170,000 visitors.

To further expand its reach, CPF Board also works with other agencies and grassroots organisations. In 2019 alone, CPF Board conducted over 60 engagement sessions for more than 6,000 grassroots leaders (GRLs) and residents. The Board trained 300 GRLs in 2019, enabling them to reach out to more than 3,000 residents right in their neighbourhoods.

I would like to especially commend grassroots advisors who have been proactive in organising CPF briefings for their GRLs and residents. Dr Maliki Mohamad, for example, has personally conducted 10 sessions in Siglap and engages his audience with flipchart diagrams and slides. I think this must be continuing in the good tradition of former Minister Lim Swee Say – he was just here earlier. He also conducted many sessions in the whole of Bedok area where he serves as Member of Parliament. Ms Foo Mee Har has personally done six briefings this year alone in Ayer Rajah. Mr Murali and Ms Sim Ann have actively supported CPF ground engagements in Bukit Batok and Bukit Timah. I personally have done more than 20 sessions in Bishan North and joined in sessions organised by advisors like Er Dr Lee Bee Wah. These sessions go a long way in educating the public about CPF schemes that are relevant to them and clarify their doubts.

CPF Board also conducts talks that target member segments such as young members who have just started work, the self-employed, and employers. The talks cover topics that are most relevant to each group, such as housing matters for young members who are purchasing their first homes.

To provide members some idea of the materials available, CPF Board has compiled information packs which are available for your collection in the Parliament Library.

Thirdly, besides mass media and segmented outreach, CPF Board uses direct personalised communications.

Many members still prefer one-on-one discussions about their specific circumstances. For most members, their first point of contact will remain one of our five CPF Service Centres – in Bishan, Jurong, Maxwell, Tampines and Woodlands. In 2018 alone, these centres received one million customers. On average, that is nearly 800 every day at every service centre. Staff at these service centres are equipped to engage members in vernacular languages, even in some dialects.

To bring CPF services nearer to members, especially the elderly, CPF Board sets up mobile service centres. These mobile centres move around to a new heartland location, usually the Community Centre (CC) or library, every two months. Members can make enquiries and perform a range of CPF transactions, without having to travel to a service centre.

In 2019, mobile service centres were set up at six locations – Kampong Chai Chee CC, Yew Tee CC, Geylang Serai CC, Bukit Merah CC, Toa Payoh Library and the one currently running at Potong Pasir CC until the end of this year and, of course, Nee Soon CCs can be considered, too. Since this initiative started in 2016, more than 36,000 have been served.

For those who prefer phone clarifications, they can contact the CPF call centre. The call centre is staffed by experienced CPF officers who can manage queries in a variety of languages. In 2018, the call centre received about 660,000 phone calls. That is about 2,750 calls per day.

Other communications that goes directly to members, such as the package members receive at age 55, or letters on their RSS or CPF LIFE payouts, have been simplified and enhanced over the years. Where the member is required to take action, this is clearly indicated for the member's attention.

For members reaching milestone ages, CPF Board provides personalised, face-to-face guidance as part of the CPF Retirement Planning Service. This is available to members turning 54 or reaching their payout eligibility age of 65. Members who have attended these sessions found it very helpful. Over 97% said that they would recommend it to others.

CPF Board has also recently redesigned its mobile app, giving members easy access to their CPF details and transactions like making top-ups. About 350,000 members use this app.

We are also constantly updating our outreach. For example, CPF Board will be putting out a series of educational posters in housing estates to clarify common CPF misconceptions. We are working with the Silver Generation Office to engage older members. We will also link these members up with other Government agencies, if necessary, such as the Social Service Offices, HDB or MOH.

In summary, Deputy Speaker, communicating CPF has been and will remain a top priority for us. We welcome suggestions from Members of the House on how we can do better.

With this, Deputy Speaker, I hope that I have addressed Members' questions and suggestions. And with your permission, I beg to move.

Mr Deputy Speaker: Mr Ang Hin Kee.

6.37 pm

Mr Ang Hin Kee: Mr Deputy Speaker, I would like to seek some clarifications from the Minister for Manpower. There were suggestions that taxi operators and so on, should start to pay for PML premiums on behalf of drivers. I wonder what is the Ministry's take on this compulsory arrangement that some had suggested. Would it therefore lead to an increase in, say, for example, rental cost of the vehicles? Who will ultimately pay for the cost? Will it lead to an increase in fare structure because the operator will essentially find a way to transfer this or the premium somewhere else? I wonder what is the Ministry's thinking about some of these suggestions that were made.

Mrs Josephine Teo: Deputy Speaker, I thank Mr Ang for following up on this suggestion. Mr Ang knows the taxi drivers very well. I think he fully understands that when the issue of PML insurance was raised in discussions with them, the issue of cost and who will bear it, was prominent in their minds.

Mr Ang is correct to point out that the cost has to be carried by someone. It is potentially the company that leases out the taxis. But he is also very right to say from the taxi companies' point of view then, it is entirely possible that they choose to recover these costs through higher rental costs which would impact the drivers without necessarily giving them an opportunity to recover this cost from the commuters which is why, I think, our thinking is not to be hasty about making PML insurance compulsory.

I think the fact that the individuals choose to be self-employed persons, we have to give them the ability to decide for themselves what kinds of protection are relevant to them. If they were comfortable with the present arrangements and do not see much need for this kind of protection to be made compulsory, it may not be right for us to insist on it for now. Keep in mind the vast majority of self-employed persons, including taxi drivers and private hire car drivers, have chosen this livelihood as a preference. It does not mean that all of them do not wish to move into regular employment.

So, our approach right now is to keep it voluntary and then, with a good base load of insured persons – in fact, the insurance premiums could be brought down, and if the insurance premiums have been brought down, then to the self-employed persons, they will do their sums and see whether it is useful to them, considering the benefits that come with it.

Mr Deputy Speaker: Assoc Prof Daniel Goh.

Assoc Prof Daniel Goh Pei Siong: Thank you, Deputy Speaker. Just a quick response to the Minister's question. I am going to echo my fellow Assoc Prof and say that, yes, in the goodness of time.

Mrs Josephine Teo: I thank Assoc Prof Daniel Goh for his clarity and in the goodness of time, if this should come to pass, I hope he will give his strong support too.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mrs Josephine Teo].

Bill considered in Committee; reported without amendment; read a Third time and passed.