The Fair Work Commission has decided that Sunday penalty rates for hospitality, retail and fast food workers will be reduced, reigniting a fierce political fight between Labor and the Coalition.

Labor and the union movement remain strongly opposed to the rate cut and have vowed to cast the Coalition Government as "out of touch" with voters.

The changes to public holiday penalty rates will take effect from July 1 while changes to early and late night loadings will take effect in late March.

The commission called for reductions in Sunday penalty rates to take place in a series on annual adjustments, starting from July 1.

Why is it a political issue?

At one stage, it looked likely the commission would hand down its potentially explosive ruling on penalty rates during last year's election campaign.

It was delayed, but that did not stop politicians making sure they had their say while campaigning.

The issue become so sensitive that South Australian senator Nick Xenophon threatened legal action over ALP advertising claiming he supported cuts to penalty rates.

The union for hospitality workers, United Voice, has lobbied the Coalition and Labor on penalty rates since 2015, and has often been seen picketing outside parliamentary offices.

Polling by the union released this week found voters in five marginal NSW seats — Robertson, Gilmore, Page, Reid and Banks — were opposed to cutting weekend penalty rates.

Now that the penalty rates have been cut, you can expect to see Labor and the union movement campaigning on the issue in these electorates.

What does Labor say?

The Labor Party ran an advertising campaign during the election saying it would "keep weekend penalty rates", but Opposition Leader Bill Shorten refused to intervene and legislate to protect such penalties.

Instead, he said a Shorten government would make another submission to the Fair Work Commission to protect the conditions.

But Mr Shorten changed his position last month, vowing to introduce legislation to protect penalty rates should the commission call for them to be reduced.

"If the Fair Work Commission backs a cut to weekend rates, Labor will act to ensure modern awards are a safety net Australian workers can continue to rely on," he said on January 25.

These comments were seen by many as a pre-emptive move to target the Coalition as out of touch with voters.

His change of mind is likely to please the Australian Council of Trade Unions (ACTU), which wanted Mr Shorten to commit to introducing legislation during the election campaign.

But it falls short of the Greens' push to legislate minimum rates for weekend work, which has been seen as an attempt to outflank Labor on industrial relations.

Shadow treasurer Chris Bowen sharpened his attack on the Coalition earlier this week, saying "Liberal MP after Liberal MP" had called for penalty rates to be abolished or scaled back.

What about the Coalition?

Numerous Coalition backbenchers have voiced their support for reducing Sunday penalty rates, but the official party line remains more measured.

Prime Minister Malcolm Turnbull has ruled out any parliamentary intervention to secure or slash the rates, saying instead the party would respect and accept the decision of the commission.

That line has been reinforced by Finance Minister Mathias Cormann on numerous occasions.

But Mr Turnbull has also referred to penalty rates as an accident of history, suggesting he would not be disappointed if the commission called for their reduction.

ACT senator Zed Seselja, Liberal MP Angus Taylor, and West Australian senator Dean Smith are just a few in the Coalition who have called for Sunday rates to be cut.

A decision to uphold penalty rates is unlikely to please this cohort of the Coalition, nor is Mr Shorten's bid to protect the rates through legislation.

Senior Coalition figures have already targeted Mr Shorten's decision to legislate to protect penalty rates, calling on him to explain his change of mind.