Saturday penalty rates will be abolished and Sunday rates halved in South Australia under a landmark agreement that a union has described as a win for employers and workers.

The Shop Distributive and Allied Employees' Association (SDA) struck the template enterprise agreement with Business SA after nine months of negotiation.

"The SDA has always been willing to negotiate with fair-minded employers provided it doesn't leave workers worse off, and this template agreement demonstrates how this can be done successfully for small retailers," SDA official Peter Malinauskas said.

He said employers would be better off under the deal, which offers significantly higher base rates of pay, guaranteed annual pay rises and improved rostering and shift breaks.

Saturday penalty rates are to be abolished and Sunday penalties reduced under the deal.

The agreement is voluntary for both the employer and the employee.

Mr Malinauskas said in return, permanent staff would have a right to regular weekends off and a choice about working Sundays or public holidays.

"It gives individual enterprises and their employees a choice, which they've always had under the Fair Work Act, but this one that has been endorsed by the state's largest union and the state's largest chamber of commerce, so we think it's a positive step forward," he said.

"Time will tell if employers and employees decide to take this up."

Mr Malinauskas said he was hopeful of wide support in the retail sector, adding that the deal reflected the specific needs of both bosses and their staff.

The Australian Chamber of Commerce and Industry expressed hope such deals could spread to other states.

Chief executive officer Kate Carnell said the SA agreement could help reboot its struggling retail sector and stimulate jobs growth, and set an example for the rest of the country.

"We are pleased the SDA has focused on the problem and we hope that sort of focus will happen across Australia," she said.

Penalty rates led to 'business closures and unemployment'

Business SA said high penalty rates had been forcing business closures in SA and it would now support employers wanting to adopt the template.

Chief executive officer Nigel McBride said the deal spread employment costs in the retail sector more evenly across the week.

Key points: Current 25 per cent Saturday penalty rate will be abolished

Current 25 per cent Saturday penalty rate will be abolished Sunday penalty rate will be time-and-a-half rather than double time

Sunday penalty rate will be time-and-a-half rather than double time Public holidays penalty will be double time rather than double time and a half

Public holidays penalty will be double time rather than double time and a half Higher base rate of pay will give full-time workers an extra $60 or so per week, or about 8 per cent more

Higher base rate of pay will give full-time workers an extra $60 or so per week, or about 8 per cent more Workers are able to choose not to work every second weekend

Workers are able to choose not to work every second weekend They can ask not to work Sundays at all

They can ask not to work Sundays at all Length of meal breaks will be extended

"As employees must be better off than the modern retail industry award, the wage costs have been spread more evenly across the whole week as a result of the reduction of penalty rates," he said.

"Clearly in reaching this agreement the SDA has recognised that penalty rates are a barrier to retailers opening and employing people on Sundays and public holidays.

"The current system is not providing what is needed and this is evidenced by high business closures and unemployment."

Mr McBride said the deal would support business, but was far from a perfect way forward.

"This isn't a champagne moment for small businesses; they're between a rock and a hard place," he said.

"They either apply a generic one-size-fits-all retail award ... or they shut down on important trading days."

Mr McBride said there had been too little action nationally to ease penalty rate costs on employers, prompting his organisation to do what it could at state level.

"For those people who aren't opening now on Sundays and public holidays, this [deal] might encourage them to do that," he said.

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"It is an absolute pragmatic compromise in the face of no political will at a federal level with, let's be honest, a Senate that's dysfunctional and hostile — we believe there should be an overhaul of penalty rates completely, [but] this is something that we can do in the meantime."

Australian Retailers Association (ARA) executive Russell Zimmerman hoped the deal could spread to other states and territories.

"The ARA welcomes any move that better aligns penalty rates with the modern retail industry," he said.

"Changes like this allow businesses to respond to their customers' needs rather than having to try to fit their allocation of labour to an antiquated system."

Xenophon hopes deal will ease job losses

Independent senator Nick Xenophon has pushed for a reduced penalty rates burden on employers and said the deal is a sign of hope.

"The issue I'm concerned about is young people have been losing their jobs, young people particularly, around the state because businesses have been shutting down on weekends, particularly small businesses in hospitality and retail," he said.

"I think what Peter Malinauskas has come up with will actually claw back some of those job losses."

From smear campaign to welcome changes, says Nick Xenophon of the penalty rates deal.

Senator Xenophon said he was pleased to see change negotiated just a year after a fierce unions campaign against his party's two state election candidates because of his ongoing push to ease the penalty rates burden.

"Twelve months ago a massive smear campaign, fear campaign, and [now] the union movement — presumably with the blessing of the state Labor Party — has come up with a compromise arrangement that doesn't look that different from the sorts of things I was talking about."

SA Family First senator Bob Day said removal of some penalty rates was a welcome effort to boost employment prospects.

"[The] decision is about creating opportunities for the unemployed, the under-employed and those yet to develop the skills they need in their career," he said.

"They are the beneficiaries of a decision that now allows them to take jobs on terms and conditions closer to what suits them."

New South Wales senator David Leyonhjelm said he and Senator Day had fought for penalty rate changes because employers were suffering.

"I have been banging on about this for months, that it is just ridiculous that people who want to work on weekends are priced out of the market by silly rules," he said.

"It is great news. SA is an economic basket case and maybe somebody there has finally woken up to the fact that they do need to change if they're going to turn it around."

A caller to 891 ABC Adelaide expressed her scepticism about how employers would achieve higher base pay for workers.

"All the department stores will sack one more person and there is nobody on the floor now ... you can't get any help anywhere you go in any store these days," she said.