"The employee's overall pay packet increases and offsets the phased-in reduction in penalty rates. We're very supportive of the commission managing this transition in a way that ensures that take-home pay is as far as possible maintained, which is the object of the modern awards," he said.

"The Fair Work Commission is very conscious of the need to protect low-paid workers. We encourage them to do that job and they've asked for some submissions on some technical issues. We'll provide them with those.

"But the important thing is they have both the intent and the tools to ensure that the changes are phased in so that workers are not - as far as possible - not worse off in terms of this transition."

Such a strategy would still amount to a real wage cut and Labor leader Bill Shorten said the only solution was to legislate to reverse the cuts and have no reduction, real or otherwise in take-home pay.

Malcolm Turnbull said he was favourably disposed towards the phase-in option. Alex Ellinghausen

"People expect governments to intervene in the community when there are decisions made which are harming a lot of people," he said.

"Labor will fight this issue in the (Parliament), we will fight it when we go out after this place and we will fight it all the way to the next election."

The Australian Industry Group, one of the strongest advocates for penalty rate cuts, said it would consider the phase-in option but warned the phase-in period could not be too long.


It noted the commission recommended the cuts be phased in between two and four years, beginning on July 1.

"The relevant employers naturally have the expectation that the decision will be implemented," said chief executive Innes Willox.

Mr Turnbull offered the solution as cracks inside the Coalition began to emerge.

Renegade backbencher George Christensen is on the warpath over the penalty rate decision while former employment minister Eric Abetz has suggested grandfathering the change so existing employees were not affected.