An estimated 8 to 10% of Singapore’s existing workforce comprise freelancers and self-employed individuals. This percentage is likely to increase with the expansion of the gig and on-demand economy. In recent months, there has been increasing public concern as to the ‘employment’ rights and legal status of these freelancers and self-employed individuals. Are they employees or independent contractors, and why does it matter?
As a matter of Singapore law, there is no single conclusive test which determines whether a person is engaged as an employee or independent contractor. An assessment of the entire context and working relationship between the parties will be necessary, and the factors which are relevant in the analysis include: degree of control exercised over the individual, method and frequency of payment for work done, period of work, provision of tools of the trade etc. The label used by the parties (or one party) in any written document to describe their legal relationship will be useful but is in no way determinative of the matter.
Unlike employees, freelancers and self-employed individuals do not presently enjoy any statutory employment benefits. They fall completely outside the ambit of the Singapore Employment Act, and cannot therefore avail themselves of the employment protections set out therein. These employment protections relate to, for example, minimum paid annual and sick leave and mandatory payments for overtime work. All of the benefits enjoyed by a freelancer or self-employed individual are found only in the relevant contract for services.
If there has been a breach by the counterparty of the provisions in a contract for services (for example, failure to pay an agreed sum in consideration for the provision of those services), or a need to enforce those provisions, freelancers and self-employed individuals do not generally have recourse to the more cost-effective, expedient avenues for resolution of these issues and which are only open to employees. These avenues include the recently constituted Employment Claims Tribunal (ECT) and Tripartite Alliance for Dispute Management (TADM), both of which principally manage issues arising between employers and employees. Freelancers and self-employed individuals may have little option but to seek redress in the Singapore courts, often a costly and time-consuming process.
From the employer’s perspective, the correct characterisation is important. If it was later found that the individuals were providing services in their capacity of employees instead of independent contractors, the employer may have acted in breach of its obligations under various employment-related legislation if the employer had not given those individuals the statutory benefits which they would otherwise have enjoyed had they been considered as employees from the start of the relationship. The clearest and most common example of this is non-payment of CPF (which is compulsory only for employees, not freelancers or independent contractors).
These issues have not gone unnoticed by the Singapore Government, which commissioned a Tripartite Workgroup in 2017 to identify common challenges faced by freelancers and self-employed individuals and develop recommendations to address these challenges. The Tripartite Workgroup comprised officials from the Ministry of Manpower (MOM), National Trades Union Congress (NTUC), and the Singapore National Employers Federation (SNEF), and it engaged and consulted a host of stakeholders including freelancing associations and communities, businesses, and other Government agencies.
In February 2018, the Tripartite Workgroup issued to the Singapore Government its findings and recommendations by way of a report.
The Workgroup identified four common challenges faced by self-employed individuals: (i) payment-related disputes, (ii) loss of income due to prolonged illness or injury, (iii) lack of CPF savings for healthcare and retirement, and (iv) lack of occupation-specific competency frameworks. Some of the recommendations made by the Workgroup include:
- Developing a “Tripartite standard” for the engagement of freelancers’ services. Such a standard would include rules such as the requirement to provide written contracts covering key terms of engagement e.g. payment schedules, quantum of payments, parties’ obligations etc.
- A specialized health insurance product tailored specifically to meet the needs and circumstances of self-employed individuals.
- A “contribute-as-you-earn” model whereby a Medisave contribution is required as and when a service fee is earned by the self-employed individual.
The full report issued by the Tripartite Workgroup may accessed here.