You’ve seen them everywhere and used their services: Grab drivers, delivery riders, writers and wedding photographers. Welcome to the gig economy. It might be new-fangled, but it’s sweeping Singapore in a big way.
So what is it? Gig workers earn their dough through stint work rather than a fixed salary. They may get their jobs via online labour-sharing or capital sharing platforms where people market their skills (such as Ushift or Mywork Global).
The freelancer you approach for a service (filming, teaching, designing, you name it) is part of the gig economy. So are those who are under an employment contract, such as Foodpanda riders. It’s a flexible working arrangement that’s tempting, but it’s a freedom that also comes with sorting out these seven financial to dos.
1. Have a stash of savings to last 12 months
“It’s always better to assume you will not have income for at least six to 12 months,” says Paul Wong, a financial adviser at Advisors Alliance Group. So track your monthly expenses for yourself and your dependents (three months should give you an idea of your spending patterns).
You also need an emergency fund. That’s after you’ve accounted for all your living expenses. You need about six months’ worth of expenses in a savings account that you can easily dip into if you absolutely need to.
2. Pay off everything you owe
“You can’t have any significant expenditures pending in the next year. Set aside a buffer sufficient to pay for them” Paul says. Apart from clearing your debt, you should ensure that you’ve also set aside enough to pay for your insurance premiums for the next 12 months. This includes Health Insurance and Personal Accident Insurance, Professional Liability Insurance, and Motor Insurance (this applies for gigs that require you to deliver goods or carry passengers in your personal vehicle).
3. Register with ACRA
Say you want to be a home baker. If you want to operate under a brand for some legitimacy, you have to register it as a business with the Accounting and Corporate Regulatory Authority (ACRA). Flying solo? Register as a sole proprietor on the ACRA website. It costs $115 for a one-year registration, or $175 for three years. However, you’ll have unlimited liability – if a customer sues you, or your business tanks, your home could become collateral.
If your business has one or more partners, you should register a company. “This entitles you to corporate tax benefits and limited liability,” says Rebecca Chiu, a freelance legal consultant, social and tech entrepreneur. This means your liability for the company’s debts and payments is limited to the amount that you invested. The process is tedious, and you’ll need to engage a corporate secretarial company.
4. Do your bookkeeping
Yes, your income is fully taxable, which means you need to account for every transaction. There are apps for this: “Accounting software like Xero or Quickbooks is easy to use and inexpensive,” says Rebecca. These can generate invoices and track deductible expenses like rent.
“You can qualify for tax deductions for these expenses,” Rebecca adds. The Inland Revenue Authority of Singapore (IRAS) website provides more information. Do bookkeeping regularly so your accounts are in order when it comes time to declare your income.
5. Know your value
Gig work means you get to renegotiate your pay, so familiarise yourself with market rates.
“Showcase your skills to your clients before you start negotiating wages. You can show how you value-add for them through a simple presentation or business deck,” suggests Rebecca.
6. Know your options
“Having options gives you bargaining power,” says Rebecca. “Explore opportunities before you commit. During quieter periods, upskill yourself so you have an edge.”
Work with established organisations that have enforceable contracts and fixed payment schedules, says Mikayla Ng, a financial consultant who’s also a member of the service staff for a local club. “They are more likely to pay you on time because they risk damaging their reputation if they don’t.”
To avoid late payments or non-payment, draft written contracts with clauses imposing a penalty or requiring the client’s personal guarantee. Legal advice is helpful when preparing important contracts to avoid disputes, says Rebecca.
A version of this story was first published in the June 2018 issue of Her World.