The Productivity Commission was asked by the former Abbott government to review Australia's workplace relations framework to see what effect it was having on levels of unemployment, productivity, and competitiveness. Nearly half of those polled said they would be more likely to vote for a party that promised to restore Sunday rates if they were lowered as a result of the Fair Work decision. Credit:Rob Banks The commission's draft report, released in August, upset the Labor Party, the Greens and the union movement for recommending changes to Sunday penalty rates. But it also upset the conservative side of politics for not recommending more radical changes to the minimum wage.

Now the Productivity Commission's final report - released on Monday - shows it has refused to assuage either side of politics on those points of controversy. The report says the minimum wage system is working well and does not need to be changed. It says penalty rates for shift work and overtime should stay in place, too. However, it has recommended that Sunday penalty rates for workers in the hospitality and retail industries should be reduced to match lower time-and-a-half rates paid on Saturdays, which will reduce their overall pay.

The recommendation does not extend to emergency workers. Employment Minister Michaelia Cash said the recommendation to reduce Sunday penalty rates was something the Fair Work Commission could adopt if it wanted to, but it had nothing to do with the Turnbull government. "The government has no plans to change penalty rates," Senator Cash said on Monday. "Penalty rates are set by the independent Fair Work Commission, just as interest rates are set by another independent body [the Reserve Bank]."

Senator Cash also said the Turnbull government would read the report and take any recommendations to the next election to seek a mandate for reform. "I don't intend to play the political rule-in, rule-out game. The government is focussed on having a mature conversation with the Australian people about the recommendations in this report," she said. But Labor's employment spokesman Brendan O'Connor has criticised aspects of the report, and Senator Cash's refusal to say which recommendations the government wants to adopt. He said the report was "Malcolm Turnbull's gift that no worker wants for Christmas". "If Malcolm Turnbull and this government does not want to support cutting penalty rates, then they can reject the recommendation of the Productivity Commission today," he said.

"But the Minister has chosen not to do that." The final report includes a new recommendation in relation to the transfer of business. One of the long-standing issues on the transfer of business is that often when a company buys out another company, there is a disincentive to bring on employees from the company that it is buying, Ms Cash said. The Productivity Commission acknowledges it wants to look at ways to provide these companies with an incentive to take on those employees so they are not left without a job. The Retail Council has welcomed the report, particularly the recommendation to treat Saturday and Sunday penalty rates equally.

"We would encourage the Fair Work Commission to consider the alignment of Sunday and Saturday penalty rates as part of its current review of the General Retail Industry Award (GRIA)," Retail Council chief executive Anna McPhee said. It also supports the recommendation for the federal government to create a new, independent Workplace Standards Commission with responsibility for reviewing and varying the national minimum wage and modern awards. But the Australian Council of Trade Unions has slammed aspects of the report, calling on Prime Minister Malcolm Turnbull to reject the recommendations to reduce Sunday penalty rates. "This is an attack on the pay and rights of the hardest-working Australians. Employees who work on weekends must be paid properly," said Dave Oliver, ACTU secretary. "The commission's recommendations are out of step with Australian values, out of touch with the modern lives of working people, and would compromise future economic and productivity growth.

"If it is not Malcolm Turnbull's intention to slash penalty rates he must rule out any future cut backs of these entitlements and make a submission to the Fair Work Commission that they be protected." The Institute of Public Affairs, a free market think tank, has criticised the report as a "missed opportunity" for significant workplace relations reform. "While the Productivity Commission has recognised that some changes need to be made, it just doesn't go far enough," Brett Hogan, the IPA's director of energy and innovation policy, said. ""The effective exemption of unions and employer organisations from competition law, the prescription of uniform wages and conditions regardless of the ability of a business to pay, and the blurred lines between participant, regulator, and legislator, means there is ample scope for reform," he said. The inquiry report was handed to the Turnbull government on 30 November.

Key recommendations Penalty rates The report says social trends and community norms have shifted so much in recent years that Australians now expect to be able to shop, go to a pharmacy, and eat at cafes and restaurants on weekends. It says Sunday working is now inherent in jobs in particular parts of the services sector - cafes, hospitality, entertainment, restaurant and retail industries - and Sunday penalty rates that are not part of overtime or shift work should be set at Saturday rates. It says weekend penalty rates should be more equal across the hospitality, entertainment, retail, restaurants and cafe industries - but without the expectation of a single rate across all of them.

It says the Fair Work Commission should introduce new regulated penalty rates in one step, but with one year's advance notice. Minimum wage: It says Australia's minimum wage should not be abolished. It says minimum wages are likely to have a zero "or even positive" effect on jobs so long as they are not set too high. It says there is no agreed estimate of the number of adult Australians paid at the hourly minimum wage rate, but previous estimates range between 4 and 11 per cent of employees who are paid up to or close to the national minimum rate.

Institutions: The Government should establish new institutional arrangements for the regulation of minimum wages and awards – specifically, it should create an independent Workplace Standards Commission with responsibility for reviewing and varying the minimum wage and modern awards. Industrial Disputes: The Government should amend the Fair Work Act 2009 to allow the Fair Work Commission to suspend or terminate protected industrial action where it is causing, or threatening to cause, significant economic harm to the employer or the employees who will be covered by the agreement, rather than harm to both parties (as is currently the case). Migrant Workers: