Prime Minister Julia Gillard has vowed to enshrine in law the principle that working outside of normal business hours should attract higher pay.

But business groups warned that stronger protection of worker penalty rates would erode the independent umpire's ability to decide cases on their merits.

Ms Gillard's promise meets a key election-year demand from unions. Credit:Louie Douvis

Ms Gillard's promise on Thursday meets a key election-year demand from unions and follows a renewed push by business to reduce or axe penalty rates, particularly in retail and hospitality.

Ms Gillard said the insertion of a new modern awards objective in the Fair Work Act would improve the living standards and the working conditions of millions of Australians in insecure work.