How Korea Legally Secures Safety Budgets in Construction Projects
Based on the Ministry of Employment and Labor (MOEL) Notification №2025–11 (Effective: February 12, 2025)
Why Korea Requires a Dedicated Safety Budget
In construction projects, safety costs are often the first to be cut when schedules tighten or budgets shrink.
Korea addresses this risk by legally fixing safety budgets at the cost-estimation stage.
Instead of treating safety as a discretionary expense, the law mandates a ring-fenced safety budget that cannot be diverted to other purposes.
In short:
Safety costs are not optional in Korea — they are legally embedded in project costs.
What Is the Occupational Safety and Health Management Cost?
The Occupational Safety and Health Management Cost is a mandatory budget required for construction projects to prevent industrial accidents.
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It covers:
- Safety measures used directly on construction sites, and
- Safety management activities conducted by a contractor’s head office safety organization, when legally required.
Scope of application
- Construction projects with a total contract value of KRW 20 million or more
Legal basis
- MOEL Notification No 2025–11: “Standards for Calculation and Use of Occupational Safety and Health Management Costs in Construction”
How the Safety Cost Is Calculated
The safety budget is calculated by applying a statutory rate to the project’s applicable cost base.
Basic formula
Safety Cost = Applicable Cost × Statutory Rate
(or Rate + Fixed Base Amount, depending on project size)Applicable cost includes:
- Direct material cost
- Indirect material cost
- Direct labor cost (Materials supplied by the client are included)
Statutory Rates by Project Type and Size
(MOEL Notification №2025–11, Appendix 1)
If multiple work types exist in one site (without split contracts), the largest-cost category applies.
Special Calculation Rules
When the applicable cost is unclear
- 70% of the total contract value is deemed the applicable cost.
When client-supplied materials or prefabricated products are used
The safety cost must be at least the smaller of:
- Safety cost calculated including supplied materials, or
- Safety cost calculated excluding supplied materials × 1.2
What Can the Safety Budget Be Used For?
The budget may only be used for industrial accident prevention, including:
- Wages and travel costs of safety and health managers
- Safety facilities (guardrails, fall protection, protective systems)
- PPE purchase, maintenance, and reimbursement
- Safety and health assessments and inspections
- Safety training and emergency response education
- Worker health protection (heat/cold stress measures, AEDs, infection prevention)
- Accident-prevention technical guidance
- Head-office safety organization personnel costs (under conditions)
- Risk assessment and hazard mitigation measures approved by labor–management bodies
Key statutory caps
- Smart safety equipment: ≤ 20% of total safety cost
- Head-office safety organization costs: ≤ 5%
- Risk assessment & hazard improvement measures: ≤ 15%
Commonly Disallowed Uses
Safety costs cannot be used when the primary purpose is not accident prevention, such as:
- Complaint-handling costs (noise, dust, community issues)
- Facilities or equipment not primarily intended for worker safety
- Temporary structures classified as construction execution costs, not safety facilities
The key test is not whether something helps safety, but whether its primary purpose is industrial accident prevention.
Audit, Adjustment, and Refund
If safety costs are:
- Used for other purposes, or
- Not used at all,
the client may deduct or reclaim the amount from the contract value.
Contractors must also submit safety cost usage records at least once every six months for review by the client or supervisor.
Final Thought
Korea’s system does not rely on goodwill or corporate culture alone.
By locking safety budgets into project costs, the law ensures that safety measures survive schedule pressure, cost-cutting, and subcontracting dynamics.
It is not about spending more —
it is about making safety spending unavoidable.
