Quora Answer: How Much Pay Increase Should I Factor When Moving from Employee to Independent Contractor?

The following is my answer to a Quora question: “How much pay increase should I factor when moving from a full-time employee to an independent contractor, considering that I have to pay taxes, CPF, insurance, and so forth?  I am a Singaporean working in Singapore.”

As an independent contractor, you are responsible for your own income.  Your pay is not guaranteed, but you have the opportunity to increase your income.  I would assume that you would have a company as a vehicle.  This allows you to expense out a lot of your spending, lowering your net profit in your accounts.  This lowers your tax payable.

As an independent contractor, you need not pay your CPF contribution for your OA and SA, but you still need to contribute to your Medisave.  You are responsible for your own insurance coverage.  Depending on what type and the extent of your coverage, this cost is variable.  You would know the nature of your business best, and the projected number of clients you have. Based on that, you can reasonably calculate your earnings.