CIRCULAR

PROVIDING GUIDANCE ON DETERMINATION OF THE UNIT LABOR COST IN THE CONSTRUCTION COST MANAGEMENT

Pursuant to the Government's Decree No. 62/2013/ND-CP dated June 25, 2013 on defining the functions, tasks, powers and organizational structure of the Ministry of Construction;

Pursuant to the Government’s Decree No. 32/2015/ND-CP dated March 25, 2015 on the construction cost management;

At the requests of the Director General of the Department of Construction Economics and the Director General of the Institute of Construction Economics;

The Minister of Construction hereby promulgates this Circular on providing guidance on determination of the unit labor cost in the construction cost management,

Article 1. Scope of application  

This Circular shall provide the guidance on determination of the unit labor cost in the construction cost management, including: total investment, construction cost estimate, contract estimate, construction price, contract price and construction price index.

Article 2. Regulated entities

1. Agencies, organizations and individuals related to the management of the construction cost of investment and construction projects using state budget funds or non-budget state funds, and investment projects under the form of public-private partnership (PPP) shall be governed under the provisions of this Circular.

2. Agencies, organizations and individuals related to the management of the construction cost of projects funded by other capital sources are encouraged to implement this Circular.

Article 3. Rules for unit labor cost determination and adjustment

1. The unit labor cost determined under the guidance of this Circular must comply with the following principles:

a) Correspond with the rank-based levels of workmanship in the construction cost estimation system.      

b) Correspond with the general level of wages of construction workers (including allowances for disadvantaged living conditions) in specific local labor market provided that such wage level is not lower than the minimum region-based salary stipulated by the Government.

c) Correspond with characteristics and the nature of work of each construction worker.

d) Be adequate to cover compulsory payment of several expenses that belong to workers’ liability as regulated (including social insurance, medical insurance and unemployment insurance).

2. The unit labor cost shall be adjusted if there is a fluctuation of general wage level of construction workers in the labor market.   

Article 4. Determination of unit labor cost 

The unit labor cost of a worker who directly performs construction works shall be determined according to the following formula:

Where:

- G_NC: the unit labor cost paid to a worker who directly performs construction works in a working day.

- L_NC: the monthly input base salary which is used to calculate the unit labor cost paid to a worker who directly performs construction works in a working day, including allowances according to characteristics and the nature of construction works according to market factors and types of insurance premiums paid by the worker as regulated (including social insurance, medical insurance and unemployment insurance).      The input base salary is stated in the Table 1 Annex 1 of this Circular for reference.

- H_CB: the salary coefficient which is applied to workers who directly perform construction works and regulated in Annex 2 of this Circular.

- t: 26 working days per a month.

Article 5. Implementation  

1. People’s committees of central-affiliated cities or provinces shall comply with the guidance stated in this Circular to direct the construction departments to cooperate with relevant agencies in the investigation, survey, determination and announcement of the unit labor cost for using as the basis for preparing and managing construction costs of local projects.

2. In case the general wage level of construction workers in the local market is higher than the unit labor cost which is determined by dividing the result of the highest input base salary regulated in Annex 1 herewith multiplied by the salary coefficient regulated in Annex 2 herewith by 26 (26 working days), the people's committee of province or central-affiliated city shall discuss with the local construction department to reach unanimous agreement on the unit labor cost before it is announced.  

3. The Ministry of Construction shall adjust the input base salary (L_NC) regulated in Annex 1 herewith when there is a fluctuation of the general wage level of construction workers of above 10%.

Article 6. Transitional provision

1. Where the unit labor cost included in the total investment and construction cost estimate of concerned construction project is approved prior to the effective date of this Circular, the investment decision-maker of such project shall decide the implementation of this Circular. If the construction contract is concluded before the effective date of this Circular, terms and conditions of the signed contract shall apply.

2. Where several construction projects are allowed to apply the salary rate and several allowances of particular characteristics by competent authorities, such application shall be continued until the construction phase ends and such projects are put into operation.

Article 7. Effect

1. This Circular shall take effect as of May 01, 2016 and replace the Circular No. 01/2015/TT-BXD dated March 20, 2015 of the Ministry of Construction on the guidance on determination of the unit labor cost in the construction cost management.

2. During the implementation of this Circular, difficulties shall be reported to the Ministry of Construction for consideration and settlement./.

Annexes enclosed to the Circular No. 05/2016/TT-BXD dated March 10, 2016 of the Ministry of Construction 

ANNEX 1

Table 1: The input base salary used to determine the unit labor cost of construction worker (L_NC)

Unit: VND/month

Notes:

- Regions where the region-I, II, III and IV input base salary rates are applied shall comply with the Government’s regulations on classification of regions and the minimum region-based salary. 

- The aforesaid input base salary is determined by dividing the investigated actual average salary by corresponding salary coefficient regulated in the Annex 2 herewith. The investigated actual average salary includes compulsory payments of insurance premiums made by the worker to the State and excludes those made by the employer (social insurance, health insurance, union dues and unemployment insurance).

ANNEX 2

Table 1: Ranks and salary coefficients of workers who directly perform construction works

Notes:

Group 1: Workers who perform the following works:

-  Woodwork, bricklaying, metal work (except for asphalt concrete), formwork, completion work and earthwork (excavation and backfilling);   

- Construction survey (including measurement);

- Operation of construction machinery and equipment (earthwork machinery, rammer, lifting equipment, drilling equipment, pile driver, pump, welder, etc.). This group includes manual workers who directly perform construction works. 

Group 2: Workers who perform construction works other than those are specified in group I

Table 2: Ranks and salary coefficients of field engineers

Notes:

As for engineers who directly perform certain construction works such as survey and testing defined in the current cost estimation system, their ranks and salary coefficients shall apply the table 2.

Table 3: Ranks and salary coefficients of artisans

Notes:

As for artisans who directly perform certain works defined in the current cost estimation system, their ranks and salary coefficients shall apply the table 3.

Table 4: Ranks and salary coefficients of vehicle operators   

Notes:

1. Group 1: Box truck, dump truck and water truck with the maximum gross vehicle weight of 7.5T; truck crane with the maximum lifting capacity of 7.5T; vacuum truck used to remove drilling mud; pickup truck; 7-seater van used for performing construction survey; vacuum truck with the maximum gross vehicle weight of 10 tonnes; pipeline pressure testing equipment with air compression of 170CV.

2. Group 2: Box truck, dump truck and water truck with the maximum gross vehicle weight rating from 7.5T to below 25T; truck crane with the lifting capacity rating from 7.5T to below 25T: concrete mixer truck with drum volume of below 14.5 m³; concrete pump truck; asphalt sprayer truck.

3. Group 3: Dump truck with the maximum gross vehicle weight of more than 25T; tractor truck with towing capacity of more than 200CV; concrete mixer truck with drum capacity of more than 14.5 m³; truck crane with lifting capacity of more than 25T.

Table 5: Ranks and salary coefficients of operators of ships, vessels and other equipment

Table 5.1: Ranks and salary coefficients of captains, second-in-command officers, 1^st assistant engineers and 2^nd assistant engineers of ships, canoes, floating cranes, floating pile driving hammers and pile driving vessels

Notes:

1. Group 1: Ship or canoe with main engine capacity rating from 5CV to 150CV. 

2. Group 2: Ship or canoe with main engine capacity of more than 150CV; floating crane; pile driving vessel.

Table 5.2: Ranks and salary coefficients of seafarers, technical and electro-technical officers

Table 5.3: Ranks and salary coefficients of operators of river suction or backhoe dredgers

Table 5.4: Ranks and salary coefficients of operators of marine suction, backhoe and grab dredgers

Table 6: Ranks and salary coefficients of engineer divers

ANNEX 3

METHOD FOR DETERMINATION OF THE LABOR COST IN THE CONSTRUCTION MARKET    

1. Principle for survey and determination of the labor cost in the construction market:

- The labor cost in the construction market (referred to as the market labor cost) refers to the wage which is paid to a worker for performing a given work and determined in the market of a specific region or area.  There are different labor cost levels in corresponding with different types of works. The labor cost is also determined on the basis of worker's level of workmanship and prestige, and the relationship between supply and demand in the labor market. The average market labor cost for a specific work is arithmetic average of different market labor costs for performing such work.  

- The unit labor cost included in the direct cost of the construction cost estimate refers to the average unit labor cost in the market in a specific region, paying to a worker who works 8 hours per day, and such cost excludes the employer’s compulsory payments of insurance premiums to the state (social insurance and health insurance premiums, union dues and unemployment insurance premium), which are included in the general cost.   

- The survey of the labor cost in the construction market must ensure that the labor cost shall be sufficiently and correctly calculated as regulated by the law at all regions where the labor cost shall be announced.

2. Steps for performing the investigation and survey of the labor cost unit in the construction market:

2.1. Classification of regions: The classification of regions for performing the survey shall comply with the Government's regulations on minimum region-based salary.

2.2. Determination of individuals subject to the investigation and survey:

- Investigate and survey workers who directly perform construction works of economic sectors in the labor market, including main workers and marginal workers for a specific work.

- Investigate and survey main workers and marginal workers of economic sectors through the employers.

2.3. Method of investigation and survey: interview or send survey questionnaires to surveyees.

2.4. The minimum quantity of surveyees for regional labor cost must be 15 main workers and 15 marginal workers, representing group works at concentrated residential regions and construction sites.   As for regions in which required quantity of surveyees is not satisfied, the survey shall be carried out on actual quantity of invited surveyees.   

2.5. Handing investigated/surveyed figures:

- Method: dividing “the sum of the algorithmic average of labor cost levels paid to main workers and the algorithmic average of labor cost levels paid to marginal workers” by 2, this labor cost is equivalent to that of worker ranked 3.5/7. Labor cost levels of other ranks of workers shall be determined on the basis of the labor cost of worker ranked 3.5/7 and tables of ranks and salary coefficients stated in the Annex No. 2.  

- Average labor cost of a worker ranked 3.5/7 is calculated as per the following formula:

Where:

- : Average unit labor cost of the skilled worker;   

- a_i: Unit labor cost of the skilled worker i;

- : Average unit labor cost of the helper;

- b_i: Unit labor cost of the helper i;

- n: The quantity of main workers and marginal workers who are investigated and surveyed in a specific region, n ≥ 15 (except for cases require quantity of surveyees is not satisfied).

- : Average unit labor cost of workers ranked 3.5/7.

- For example, after the average labor cost of workers ranked 3.5/7 has been determined, the labor costs are calculated as follows:  

- Unit labor cost levels of group-II workers shall be determined as per the method of determining unit labor cost levels of group-I workers as stated in the aforesaid example.

2.6. As for remote regions and islands, people’s committees of provinces shall consider and adjust labor cost levels of construction workers with the coefficient at most at 1.2 of the average labor cost levels determined as regulated in section 2.5.