From 2024 onwards, platform workers who are below the age of 30 will be required to contribute to their CPF accounts.
There will also be a gradual increase of the CPF contribution rates over five years before hitting the full rates.
We believe that this is good for the gig workers because we cannot assume every worker is able to save money. The contribution could improve their ability to buy a house or to retire in the future.
Of course, this policy isn’t popular with the workers as they feel their immediate purchasing power reduces since CPF monies are locked up.
Based on the employee contribution rate of 20%, a Grab delivery work could take home $9.60 per hour should his commission earned is at $12 per hour – less money available for use.
Some workers may consider other job offers where they could enjoy higher take home amounts.
Or it could be a case where other delivery jobs may not be classified as a platform and could avoid paying CPF. Some of the workers may migrate to these jobs.
Thus, the number of platform workers on Grab may reduce and lower its Gross Merchandise Value (GMV).
Also, Grab would have to contribute to the workers’ CPF at a 17% rate in the long run. This would decrease its margins. Let’s find out how big the impact would be and the assumptions for the estimation.
Firstly, most of the platform workers aged 30 and below are in delivery. We can assume the national average applies to Grab since it has more than 50% market share in Singapore.
Secondly, we have to estimate the delivery workers’ earnings in Singapore, so as to apply the CPF contribution rate.
Grab commanded 54% of the Singapore delivery GMV in 2021, or worth $1,566m in US dollars.
Out of which, the delivery workers get a 17% share of this GMV or $265m.
31% are below 30 years old and hence, the CPF contribution would apply to the $82m earned.
A 17% contribution rate from the employer would amount to $14m.
That would cost Grab about 2% of its revenue in 2021.
This amount isn’t big enough to make a dent to Grab’s financial numbers but enough to shave off some margins. Ultimately not a big concern for Grab.
