What are (or aren’t) the protections available to freelancers?

Mar 09, 2017 06.00PM |
 

by Lee Chin Wee

DURING the Committee of Supply debates on Mar 6, Manpower Minister Lim Swee Say clarified that if you work in the gig economy, it doesn’t necessarily mean that you are a freelancer.

Mr Lim explained that there is “no official definition of the gig economy”. The Organisation for Economic Co-operation and Development (OECD), he said, instead uses the term “platform economy” to refer to workers who use online platforms such as Uber and Airbnb to find “short-term, piecemeal jobs”.

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So who is, and isn’t, protected by labour laws?

Not all gig economy (or platform economy) workers are freelancers. An employee of a transport company who uses Grab to find customers, for example, can be considered a gig economy worker but is not a freelancer. These workers are entitled to labour law protections, such as mandatory minimum leave days.

Hence, in terms of labour protections, it does not matter whether you use an online platform to find work or use more traditional avenues like taxi company rental. What does matter is your contract status – if you are a freelancer, you have entered a contract for service while if you are a contracted employee, you have entered a contract of service.

As employees are, in theory, subject to an asymmetric employer-employee relationship, a greater scope of labour laws applies to them. In contrast, freelancers are considered to be self-employed and are therefore not legally entitled to statutory protections and benefits accorded to employees. The legal rights and obligations of freelancers are largely dependent on the terms and conditions of the contract they enter into with their hirers.


What are the differences between freelancers and employees?

The Ministry of Manpower (MOM) website sums up the differences in this convenient table:

 

Contract of ServiceContract for Service
Has an employer-employee relationshipHas a client-contractor type of relationship
Employee does business for the employerContractor carries out business on their own account
May be covered under the Employment Act Not covered by the Employment Act
Includes terms of employment such as working hours, leave benefits, etc.Statutory benefits do not apply

 

  1. Central Provident Fund (CPF) contributions: Freelancers earning an annual Net Trade Income (NTI) of more than $6,000 need to contribute to Medisave. There is no legal obligation to contribute to the Ordinary or Special Accounts, but freelancers can do so on a voluntary basis. Comparatively, employees are entitled to monthly employer CPF contributions and also are obliged to pay into their CPF accounts themselves.
    • The median Medisave balances of self-employed persons was $21,700 in 2014, compared to $14,300 five years ago. This is still lower than the median Medisave balances of employees, which was $27,700 in 2014.
      .
  2. Employment Act: Freelancers are generally not covered by the Employment Act. This means they do not get paid public holiday entitlements (min. 11 days per year), sick leave (min. 14 days of paid outpatient leave and 60 days of paid hospitalisation leave per year), paid annual leave (min. 7 days per year), timely payslips (monthly salary within 7 days, overtime pay within 14 days), etc. Freelancers must instead seek recourse through the Small Claims Tribunal or Subordinate Courts instead.
    .
  3. Work Injury Compensation Act: Freelancers are generally not covered by the Work Injury Compensation Act. This means, if they get injured while performing a task or job, their client does not have to pay the legally stipulated amounts corresponding to the work injury. Freelancers must instead seek recourse through a civil suit.
    .
  4. Union Membership: Freelancers can still be NTUC members. This means they enjoy membership benefits such as subsidised skills retraining workshops run by NTUC partners and rebates on grocery shopping at NTUC FairPrice. However, the Trade Union Act, along with the Industrial Relations Act and the Trade Dispute Act, does not apply to freelancers. NTUC will not engage in collective negotiation or mediation on behalf of freelancers, as there is no traditional employee-employer relationship.


What is the problem?

Some will no doubt argue that freelance workers in the gig economy were not coerced into taking up these jobs. The lack of labour protections, the argument goes, is not a problem as one is not subject to the same employee-employer relationship that is characteristic of contracted full-time work.

In the particular instance of companies like Uber, the question is whether the driver-Uber relationship is that of a freelancer-client or employee-employer. Uber drivers do exhibit many employee-like characteristics such as working for only one contractor, and have “fixed” working arrangements – not contractually, but in terms of the minimum hours or peak periods one must work to remain marginally profitable. It is arguable that these workers are freelancers in name but employees in substance.

The legal lacuna created by Uber has given rise to a number of lawsuits filed against the company in other countries. The claimants argue that Uber misclassifies drivers as independent contractors, rather than employees.

In 2013, 385,000 current and former drivers in California and Massachusetts launched a class action lawsuit against the company, alleging that Uber was legally obligated to give them employee pay and benefits. Uber settled for a $84 million ($100 million if the company goes public) payout, to be distributed to drivers based on how many miles they had driven. More recently, the London Central Employment Tribunal ruled that Uber drivers should be classified as employees, earn at least the national minimum wage and get paid vacations. Uber appealed, and the case is still ongoing.

Moreover, recent Ministry of Manpower statistics show that out of the 200,000 freelancers in Singapore, 19 per cent do not consider freelancing their preferred choice. This means that, in some cases, the gig economy is substituting rather than complementing the traditional economy.

In other words, someone working as a contract employee of a private transport company may have little choice but to drive an Uber: In today’s slowing economy, either he keeps his existing labour protections and takes a pay cut, or he potentially earns more by joining the gig economy but loses his employee benefits.

A further problem is that freelancers do not pay into their CPF Ordinary or Special Accounts. As the number of gig economy freelancers grows due to the proliferation of online platforms that disrupt traditional industries, the G will have to deal with increasing retirement insecurity among older workers. What this means for national savings and government investments remains to be seen.

 

Featured image by Sean Chong.

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