The building industry warned on Tuesday that companies would struggle to afford the levy hike, which the ACT government said was needed to guarantee employees access to their entitlements.

Industrial Relations Minister Simon Corbell said increasing a construction industry levy from 1.75 per cent to 2.5 per cent of gross wages would cost companies an average of $40 a fortnight per worker.

Mr Corbell said the government had approved the levy in response to actuarial advice commissioned by the Long Service Leave Authority board.

''The very clear advice from the board is that this is the level it needs to be set at achieve the ongoing viability of the scheme,'' he said.

''And it would be worth making that observation that if there are more significant improvements in the returns the funds gets from its other investments, then the government is certainly open to revisiting the levy amount and whether it could be decreased.

''But that's not likely in the short term.''

The long-service levy increased from 1.25 per cent to 1.75 per cent last year.

Mr Corbell said a decline in construction activity had led to more building workers requesting payment of their entitlements.

''With a downturn in construction activity, more workers will access the fund as they will seek to obtain their long-service leave entitlements as a form of replacement for lost income,'' he said.

Master Builders Association executive director John Miller said his members would struggle to absorb the levy increase and it would be difficult to pass it on to consumers. ''The industry is really struggling with increases in costs when activity is going south,'' Mr Miller said.

''We've got to be doing more to keep costs down for business, to encourage employment, not to actually raise costs.

''It's difficult that we are continually seeing increases - not just in the levy but in other things - at a time when activity levels are waning.''

Mr Miller said the levy had been set at 1 per cent of gross wages until about five years ago.

''Clearly, quite a number of years ago there were decision made to increase access to entitlements and that's put pressure on,'' he said. About 1600 employers are registered for the long-service leave scheme, 900 of which employ four or fewer people

The Construction, Forestry Mining and Energy Union backed the levy increase.

CFMEU ACT branch secretary Dean Hall, a member of the Long Service Leave Authority board, said the increase was essential to ensure the viability of the scheme for 12,500 workers.

''We are certain that this is what needed to give security to so many workers and their families,'' he said.

The scheme allows construction workers to take their long-service leave entitlements with them when they change employers.

In 2011-12, the scheme made 767 payments worth $6.76 million. In the same year, it received $6.23 in levy contribution payments from employers.

Mr Hall said portable long-service leave provided dignity and security to construction workers.

''It's not unusual for a construction worker to work for half a dozen employers in a year,'' he said.

''When other people take long-service leaves in different workplaces they use that long-service leave as a reward for being with an employer for a period of time.

''It's often used in our industry to keep your family going when there's downturns in work.''

Mr Hall said workers also accessed long-service leave if the physical toll taken on their bodies by their jobs meant that they needed time to recuperate or to retire.