The small business lobby is "enthused" by the Fair Work Commission's (FWC) push to allow workers in the retail and hospitality industries to forgo penalty rates in return for higher hourly rates.

The proposal, flagged by the commission's president Iain Ross, involves so-called "loaded rates" and would allow employees covered by an award to trade penalties and overtime for higher base wages, without the need for a new enterprise agreement.

Addressing a business conference in Melbourne yesterday, Justice Ross said the more flexible arrangement would be particularly attractive to small businesses.

"There would need to be appropriate safeguards and interested parties would be given an opportunity to comment on any proposal," he said.

Council of Small Business chief executive Peter Strong said he was "very enthused" about Justice Ross' remarks, adding it would simplify a complicated award system.

"A lot of what he says is common sense and he's looking for a solution and in this case, the solution to the complexity that small business has to face when dealing with award conditions," he said.

Attention turns to Sunday penalty rates decision

Justice Ross said the FWC would revisit the "loaded rates" issue after it hands down its much anticipated, and long-awaited decision on penalty rates either late this year or early next year.

The retail and hospitality sectors are pushing the FWC to adopt the Productivity Commission's recommendation and cut Sunday penalty rates to match Saturday rates, but the move is being fiercely fought by Labor and the unions.

In a sign of how politically charged this debate is, Prime Minister Malcolm Turnbull refuses to be drawn on any proposal or recommendation relating to penalty rates.

"We don't have a plan or a policy to change penalty rates," he said.

"It's a matter for the independent umpire."

The FWC has received 6,000 submissions on the penalty rates case and has held 40 days of hearings in what Justice Ross described as a "considerable undertaking".