SINGAPORE, 28 November 2024 – According to a new report by Momentum Works, Singapore’s Platform Workers Act could lead to an annual cost increase of approximately US$368 million for the platform industry over the next five years.

This additional cost is calculated based on the employer CPF payments stipulated by the Act. In addition, the workplace injury compensation insurance, another key requirement in the act, can cost the industry as high as US$32 million per annum. 

The “Transforming on demand platform work” report examines the effects of gig worker legislation globally and estimates the financial costs of the upcoming Act in Singapore to platforms and its users.

“The intense debates on the topic across the globe underscores the importance and growth of on-demand services. While governments and platforms mostly agree that gig workers can be afforded better protection and representation, actual policy making and implementation contain a lot of nuances,” said Jianggan Li, Founder and Chief Executive Officer of Momentum Works. 

Globally, nearly one hundred million people work in the on-demand industry, prompting governments to seek better protections for this workforce. Different countries and jurisdictions have adopted various approaches, as highlighted in the report:

      • California: Initially required platforms to reclassify independent contractors as employees in 2020. After prolonged legal disputes, the California Court allowed Uber and Lyft drivers to remain classified as independent contractors, illustrating the complexity of gig worker classification.
      • Spain: Passed the “Riders’ Law” requiring delivery riders to be classified as employees. This potentially led to Deliveroo exiting the market, leaving 4,000 riders jobless. Just Eat, which complied with the law, faced close to two times higher delivery costs compared to non-compliant competitors.
      • China: Provides platforms with the flexibility to classify workers based on the actual nature of employment (a ‘duck test’). Platforms can choose to classify workers as official employees with full benefits, temporary workers with basic benefits, or independent workers without benefits, based on a set of guidelines.
      • Singapore: Recognises platform workers as a distinct workforce, mandating employee-level protections in social security, work injury protection, and representation. This is expected to result in an additional US$368 million in social security contributions, likely affecting consumer prices.

Commenting on the findings, Li said: “It is important to note that platform operators’ existing business models do not account for employer-employee-like costs that the Act calls for. With the substantial additional costs, platforms of all sizes will need to adjust their business models going forward.  Larger platforms, which have a larger number of platform workers on them, will incur the most significant cost and might choose to pass the cost along to the consumers, while smaller platforms will reevaluate the viability of the business, as we had seen in Spain.

We may see prices for platform services going up, which could dampen the demand for their services initially, but ultimately increased prices will better reflect the true cost of fair labour practices in the long term.”

About Momentum Works

Momentum Works, headquartered in Singapore, is a venture outfit that leads insights on the digital ecosystem in emerging markets, through research, consultancy, community engagement and venture building. 

Momentum Works is the go-to source for comprehensive expertise in navigating the evolving landscape of emerging markets, especially in ecommerce, new retail and F&B, as well as application of emerging technologies. 

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