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3 reasons to apply for Contribute as you earn (CAYE) in Singapore

out how CAYE affects you as a company or as a self employed person

Last Updated on by Tree of Wealth

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As a self-employed person who contracts your services to a government agency, you might have heard of Contribute As You Earn(CAYE). The scheme was introduced in 2020 and is currently piloted by the Government. All freelance contractors working for a government agency will receive Medisave contributions directly transferred by the agency.

Suppose you’re a company wondering how to contribute CPF for a self-employed person(see CPF’s definition of self-employed person here) through CAYE or a self-employed person who is wondering how CPF self-contribution via CAYE can help you. In that case, we’re here to help you review three reasons this scheme benefits companies and SEPs.

Why should companies or self employed persons come onboard Contribute as you earn (CAYE) in Singapore?

1. CAYE helps freelancers contribute to Medisave regularly

With CAYE, companies can help contracted freelancers set aside regular but smaller Medisave contributions each time they receive their payout. This would help SEPs better manage their account since they do not have to worry about paying a huge sum at the end of the year.

2. Convenient processing for companies and freelancers

The second reason is that for both companies and freelancers, processing self-employed Medisave contributions is hassle-free.

For example, suppose you, as the SEP, are contracted with a government agency. In that case, the CAYE scheme will automatically help you transact your contributions to your Medisave account based on your contribution rate without spending time on paperwork. In addition, you can monitor your Medisave contributions to assess if you are meeting your payable Medisave amounts yearly.

As the company, you merely need to follow the steps on the CPF site to start tapping on the CAYE scheme to make Medisave contributions to your contractors.

Once onboarded, your organisation can submit invoices for your self-employed vendors.CAYE contributions are automatically calculated and deducted upon invoice processing. In addition, payment records to self-employed vendors are available online so companies can conveniently view and download them for finance reconciliations. Note that this scheme is currently piloted by government agencies and is voluntary for private companies to join.

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3. Higher interest rates compared to bank accounts

Lastly, the regular amounts will help SEPs earn more interest on their CPF monies compared to keeping the money in a bank savings account.

Bank saving accounts yield a lower interest rate than the Medisave interest rate of 4% and up to 5% for the first $60,000 of your combined balance.

This leads us to the next important question: How is CAYE calculated?

Here is how CAYE is calculated, according to CPF Board:

CAYE payable rate = (A x B)/C


B: C
The Medisave contribution rate for your estimated annual Net Trade Income (NTI) and your age Your estimated annual NTI for the year

Your estimated annual revenue for the year

A common misperception amongst employees is that those who are self-employed (known as SEPs, in short) are free from CPF contributions. That is untrue. SEPs are required to make a CPF self-contribution.

The maximum Medisave contribution for self-employed persons differs based on age and their net income. But whatever the amount, this sum is payable, and it’s a compulsory contribution if the SEP wants to continue offering their business services.

While SEPs enjoy a self-employed CPF contribution tax relief if they make mandatory and voluntary top-ups, the Government has noted that many SEPs face the challenge of making regular Medisave contributions. Whether they are busy or their cash flow falls short on the month, they often cannot make total lump sum payments. As a result, many contractors resort to paying the composition offer for self-employed persons online, which is a composition fee of up to $1,000 for non-compliance with CPF matters. Note that employers are also subjected to these penalties.

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One way to stay on top is for SEPs to use GIRO or make a voluntary CPF contribution online. Another option is to tap on CAYE if the company you provide services for is on the CAYE scheme.

Under the CAYE scheme, self-employed persons (SEPs) who provide services directly to the public sector can have their Medisave contributions transferred by the Government as and when they earn such income. If you want more details, check out our ten minutes guide here(anchor link to previous article) to see how CAYE works.

Can I adjust the CAYE rate for CPF self-contribution?

Yes. As CPF’s website states, you can adjust the CAYE rate for CPF self-contribution anytime if you foresee you will have more income from more jobs or have more business expenses. However, note that the CAYE contributions are only an estimated figure. SEPs still have to declare their actual net trade income to the relevant Government authorities on the following year to calculate the full Medisave payable amount.

If you’re contributing to Medisave as a SEP, you can ask for a refund or keep any CAYE contribution amount more than your actual Medisave payable.

However, if you still fall short of the full Medisave amount despite your CAYE contribution, you would need to contribute the outstanding difference at the end of the year. Use the self-employed contribution calculator on the CPF board’s website here to assess how much you have to pay.

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Learn more about Contribute as you earn (CAYE) in Singapore with our dedicated financial planners

Time is money for everyone, but particularly so for a self-employed person. Spent your hours well on providing your services instead of wasting time on tedious calculations or paperwork will slow your business returns.

For companies, you don’t want to waste precious resources delegating employees to wade through vast amounts of information on CPF matters.

Whether you are a company interested in CAYE or a freelancer who needs help planning your finances, our dedicated financial advisors are ready to work with you. We bring our wealth of experience and know-how of local policies to guide you through the most complex financial matters. Contact us for a non-obligatory consultation now!

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