Revision of the Construction Industry Law is approaching! How will the "Labor Cost Standards" affect business practices?
Updated: July 2026, 1
The revised Construction Business Act, which will be fully implemented in December 2025, will introduce new "labor cost standards (standard labor costs)" into construction contracts.
The Ministry of Land, Infrastructure, Transport and Tourism is holding information sessions across the country and calling on both clients and construction companies to establish new business practices in order to improve the treatment of skilled workers and ensure the sustainability of the construction industry.
With the spread of standard estimates, the cost structure of construction costs will become more transparent as labor costs, statutory welfare costs, and safety and health costs will be clearly stated in the breakdown.
On the other hand, ensuring the effectiveness of the system is a major challenge, and attention is being paid to its linkage with contractual practices and CCUS (Construction Career Advancement System).
Standard labor cost structure and calculation method
Standard labor costs are created and recommended by the Central Construction Industry Council, and are calculated by multiplying the public works design labor unit price by the unit rate for direct construction work. This prohibits extremely low estimates and contracts, and makes it possible to prevent price competition that cuts the wages of skilled workers.
This system is not simply a price regulation, but serves as a foundation for ensuring that skilled workers are properly evaluated and that the construction industry will continue to have human resources in the future. The background to the system's design is the current situation in which the construction industry is facing a serious aging population and labor shortage, and improving working conditions is considered essential to ensuring the sustainability of the entire industry.
Popularization of standard quotations and transparency of cost structures
The Ministry of Land, Infrastructure, Transport and Tourism also plans to popularize standard estimates that clearly show "expenses necessary for employment," such as statutory welfare expenses and safety and health expenses, in addition to labor costs. This will separate material costs from labor costs, and the breakdown of expenses will be clearly shown to clients.
In the past, the breakdown of construction costs was unclear, making it difficult for clients to understand why costs were incurred. The use of standard estimates is an important system that promotes transparency in construction costs and encourages the conclusion of contracts at fair prices.
Issues in ensuring effectiveness and the Ministry of Land, Infrastructure, Transport and Tourism's response
However, simply setting standard labor costs as a benchmark does not necessarily lead to improved treatment of skilled workers.
The Ministry of Land, Infrastructure, Transport and Tourism has also pointed out that "creating standards will not immediately lead to improvements," and is simultaneously working on measures to ensure the effectiveness of the system.
Specifically, its activities include:
- Use of "commitments" by contracting parties
- "Voluntary Declaration System" to make visible construction companies that pay fair wages
The following are being considered:
The aim of this is to ensure that both the client and the construction company share responsibility and to ensure that the system becomes established.
At the briefing session, a client asked, "Is it legal to use unit prices other than the public works design labor unit prices when calculating the estimated price?" The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) responded that "there is no provision that immediately makes it illegal," but pointed out that cutting estimates based on the public works design labor unit prices could be illegal, highlighting practical points to be aware of.
Linked with the Construction Career Up System (CCUS)
In order to increase the effectiveness of the system, it is essential to have a mechanism that ensures that labor costs are reflected in the wages of skilled workers.
The key to this is the Construction Career Up System (CCUS), which began operation in 2019.
CCUS already has 168 million people (56% of all skilled workers), and their employment history and qualification information are stored in a database. Furthermore, annual salary estimates by level based on ability assessments have also been published, and if a system is introduced that allows actual wage data to be registered in CCUS for comparison, this will be a major force in ensuring the effectiveness of the system.
Changes in mindset required for clients and contractors
The essence of system reform is not simply "following the rules." In order to guarantee fair treatment for skilled workers and increase the sustainability of the construction industry, a change in awareness is required on the part of both clients and contractors.
Clients must view construction companies as partners and be prepared to pay fair labor costs. Construction companies must be prepared not to make labor costs, which are the source of wages for skilled workers, subject to competition. Only when these new business practices take root can the system be said to be truly functional.
Summary
The introduction of the standard labor cost system under the revised Construction Industry Law marks a major turning point in improving the treatment of skilled workers and ensuring the sustainability of the construction industry. The spread of standard estimates and linkage with CCUS are expected to make cost structures more transparent and ensure the effectiveness of the system.
On the other hand, many issues remain in the practical implementation of the system, and it is essential to change the mindset of both clients and contractors and to establish new business practices. Administrative scriveners are also expected to support the smooth operation of the system through licensing and contract practices, and contribute to the healthy development of the construction industry.
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When it comes to obtaining a construction business license, speed is of the utmost importance.
For example, if procedures for financial statement change notifications and business review are delayed, this will affect the actual construction contract, as the business review notice will expire. Furthermore, if various applications are missed by deadline or notifications are regularly omitted, the company may be subject to administrative guidance.
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