FREELANCERS and “gig workers”, who are already outnumbering traditional, fixed wage earners, need to save up between 20% and 30% of their current earnings to ensure they have enough to take care of themselves in their old age.

They should also invest in medical insurance as the cost of treatment has skyrocketed in the past 15 years and is expected to go up in the near future, said the Employees Provident Fund (EPF).

These were the recommendations from EPF, the government’s private sector retirement scheme provider, so that freelancers will have enough money and are able to care for themselves in their old age.

The savings rate for freelancers is higher than traditional wage earners who draw a fixed monthly income. The latter gets a contribution of at least 13% of their wages from their employers to their EPF savings on top of the 11% they are mandated to save.

These recommendations come as the number of those who are self-employed continue to expand but experts say not enough is being done to give them social safety protections that are common in permanent, fixed-income employees.

The Malaysian Employers Federation (MEF) said freelancers are often in precarious working conditions where they have little legal protection from companies who exploit them.

In light of these challenges, the EPF told The Malaysian Insight it is going all out to promote its voluntary retirement scheme i-Saraan, where the government will chip in 15% on savings balance or a maximum of RM250 per year.

“Don’t lose sight of retirement and consider saving with EPF through i-Saraan. They can save any amount, any time, and get to see their savings grow through EPF’s annual dividends,” EPF told The Malaysian Insight.

EPF last year declared an annual dividend of 6.15% for its conventional and 5.9% for its shariah savings.

I-Saraan members will also have free access to EPF’s retirement advisory service where the fund can help them plan for their retirement.

“Budgeting is tough enough, but it’s even more challenging when your income fluctuates. Set aside 20% to 30% from your income for savings and retirement and emergency fund.”

Despite primary medical care being relatively cheap in Malaysia, the EPF also recommended that freelancers take up medical insurance.

According to Health Ministry and insurance company data, cost of medical treatment has increased to about 10% to 15% per year, EPF said.

“Based on statistics from the past 15 years, the medical inflation rate has increased by a whopping 107%. Over the course of 15 years, the cost of medical procedures has almost doubled.”

More freedom, less savings

EPF estimates that the population of freelancers and the self-employed have grown by 31% and has surpassed those in the conventional workforce.

Despite EPF’s aggressive push of i-Saraan when it was first introduced in 2010, the scheme has only managed to attract 189,473 members as of 2018.

In comparison, the fund estimates that there are more than 13 million workers who are categorised as self-employed, which include freelancers.

The fund said the low savings rate of this group of workers may be due to high living costs and debt commitments.

Yet in Malaysia, the prospect of freelancing is especially attractive to millennials, according to a survey by recruitment services firm, The Addison Group.

About 66% of millennials say they were willing to become gig workers as opposed to those in the previous generations, said the EPF. In comparison, 59% of Gen-Xers and 44% of baby-boomers say they would take up freelancing.

“The gig economy is forecast to be valued at approximately US$63 billion (RM260 billion) by 2020, according to a study by Price Waterhouse Cooper.”

EPF said people are attracted to freelancing due to its flexibility, freedom to be more creative, desire for greater job satisfaction and increasing cost of childcare.

Precise data on the size of the gig economy and how many freelancers are there is hard to come by. But the EPF estimates that they are part of the informal sector, which also includes businesses such as small scale food operators, agricultural workers and taxi and lorry drivers.

Drivers on ride-hailing platforms, dispatch riders for certain food delivery companies as well as freelancers in the creative industries such as entertainment and advertising are also a part of this sector. Industries such as accountancy, IT and the media also have freelancers.

In its 2017 report, EPF said that of the more than 22 million Malaysian workers, only 6.8 million are active EPF contributors, while about 1.7 million are civil servants covered by the public sector pension system.

However, there are about 13.7 million comprising the self-employed or freelancers who are not covered by EPF any formal social protection programme. – April 28, 2019.