International Business & Economy Josephine Teo: Freelancers employed by govt will have part of their salaries...

Josephine Teo: Freelancers employed by govt will have part of their salaries put into Medisave

The Contribute As You Earn (CAYE) scheme however will not be extended to the private sector

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Singapore— Manpower Minister Josephine Teo said on August 20, Tuesday, that freelancers who are employed by the Government will have part of their salaries put automatically into their Medisave accounts.

However, Ms Teo added that there are no plans for this scheme, called Contribute As You Earn (CAYE), to be extended to the private sector.

CAYE’s purpose is to aid workers who are self-employed for saving for their self-care needs and to help them manage their cashflow. At the moment, their contributions to Medisave are compulsory upon receiving their tax bill, should they receive a net trade income of over S$6,000.

The Manpower Minister added that CAYE will make it easy for the self-employed, removing possible concerns over larger lump sum contributions at times when they have no employment. And as a freelancer’s Medisave account gets filled up, that worker also gets the benefit of the four percent interest earlier.

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She said, “It adds convenience and the self-employed persons don’t have to worry about having to contribute bigger lump sums during ‘dry seasons’. They also start getting the 4 percent MediSave account interest earlier.”

Ms Teo said these remarks at the PropNex Convention in Star Vista. PropNex is Singapore’s largest listed real estate agency.

The Manpower Minister heard that there are real estate agents who find it hard at times to pay the mandatory contributions to their Central Provident Fund’s (CPF’s) MediSave accounts, to the point that they could lose their jobs because of their failure to pay these contributions.

The amount they need to pay is based on last year’s earnings, which, in this year’s weakened economy, has made it difficult for them.

This is why Ms Teo talked about the CAYE scheme for freelancers, though at this point it will only apply for those employed by the government from 2020 onwards.

The chief executive officer of PropNex, Ismail Gafoor, told Ms Teo that due to a downward property market cycle and slow payments by developers, real estate agents are now having a hard time meeting their MediSave contributions.

If they fail to do so, they will not be able to renew their licenses for next year, which spells further trouble for the agents.

To applause from the real estate agents in the audience, Mr Gafoor said, “But his obligation is that he has to pay, otherwise next year, his licence is affected. So there is a three-year period to consider — last year’s performance, (MediSave) payment this year, and next year’s survivability. This is where salespeople are stressed.”

Ms Teo said that most workers do not have this problem because of automatic MediSave deductions from their salaries. “That is not the peace that you have. So that is why we decided to try out CAYE.

If we open this scheme to the private sector and you believe this scheme to be helpful to you, then before the commission is paid out to the agent, at the backend you can calculate what the MediSave contribution should be… and that goes into the (MediSave).”

She also encouraged the agents to keep on making voluntary contributions to their CPF as this would help them in their retirement years.

Mr Ismail asked Ms Teo if the self-employed can avoid making more MediSave contributions if they’ve already paid the maximum sum allowed in their MediSave account, which is S$57,200 for this year. Beyond that, contributions go to Retirement Accounts or the CPF Special.

He told her, “Some of us have concerns that when the MediSave component is fulfilled, (we still have to pay) in the name of MediSave (and then it gets channeled) to Special Account (when the cap is reached). No doubt the interest is much higher (in Special Account), but this is not right as it is collected in the name of MediSave.”

Ms Teo explained that while the self-employed are as valued as any other worker, their contribution only goes into MediSave, not the CPF Ordinary Account or directly into the Special Account.

“We are quite unique in the world in that our CPF tries to help individuals meet three basic needs: A roof over your heads; the ability to take care of healthcare expenses, especially the big bills; and have some spare cash to use in retirement.”

In the course of her speech, Ms Teo noted that the self-employed make up eight percent of the country’s labour force, with around 200,000 people doing freelance work. -/TISG

Read related: Tan Kin Lian questions why Josephine Teo is both manpower minister, and in-charge of population policies

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