Sunday penalty rates will be cut for employees in the hospitality, retail and fast food sectors, the Fair Work Commission announced on Thursday.

The landmark decision will see significant reductions in Sunday and public holidays across the industries, but not to Saturday levels as originally thought.

The rates differ across the different industries, which will likely cause divide between unions and business sectors.

The Fair Work Commission has agreed with the Productivity Commission's argument that there are likely to be some "positive" employment effects from a reduction in penalty rates.

Fair Work Commission president Iain Ross said Sunday penalty rates would still be higher than for Saturdays.

"Generally speaking, for many workers, Sunday work has a higher level of disutility than Saturday work," he said.

"Though the extent of the disutility is much less than in times past."

Mr Ross said the commission took evidence from business owners that Sunday penalty rates had led employers to restrict trading hours and reduce staff levels.

"The evidence also supports the proposition that a reduction in penalty rates is likely to lead to increased trading hours, an increase in the level and range of services offered on Sundays and public holidays and an increase in overall hours worked," he said.

Mr Ross said the changes would provide greater consistency to penalty rate settings in the hospitality and retail awards.

Do you agree Sunday penalty rates for hospitality and retail workers should be cut? Yes 5277 No 17867

Australian Council of Trade Unions president Ged Kearney said the ruling was "a bad day for workers in this country", adding millions of the lowest-paid workers would lose out.

"How realistic is it to ask the lowest paid workers to take a pay cut of up to $6000 a year," she said.

"We would not accept any cut to take home pay. We're talking about people who don't earn a fortune... This needs to be stopped. We will not have a class of working poor in this country."

Hospitality worker Erin Gibbons said the whole industry had become unstable, adding the ruling "has so many tentacles and consequences".

"People will be forced to make up for the cut whether it's through a second or third job, or becoming dependent on others or turning to welfare," she said.

Sunday rates have been cut, but not to Saturday levels as many suspected. (AAP)

"The biggest thing is - can I stay in this industry?"

Australian Retailers Association executive director Russell Zimmerman said the decision would grow the sector.

"Reducing these rates from double time to time and a half, will increase retail growth nationally and reduce the unemployment rate in Australia," he said in a statement.

FAST FOOD INDUSTRY:

* Full time / part time staff: rates to drop from 150% of base rate to 125%

* Casuals will drop from 175% of the base rate to 150%

HOSPITALITY:

* Full time and part time workers will see Sunday rates reduced from 175% to 150%

* Casuals will stick to 175% of the base rate

RETAIL:

* Full time and part time workers’ Sunday rates to drop from 200% to 150%

* Casuals’ penalty rates will drop from 200% to 175%