Retail penalty rates will be abolished in South Australia on Saturdays and halved on Sundays in exchange for a higher base rate of pay and other improved conditions for employees.

The deal, which applies to small businesses and affects up to 40,000 staff, offers SA retail workers a higher base pay rate and the ability to choose not to work weekends.

The agreement is said to cut penalty rates for Sundays from 100 per cent loading to 50 per cent, and reduces them on public holidays from 150 per cent to 100 per cent.

It gives workers a guaranteed three per cent annual pay rise and the right to refuse to work on the weekend, while permanent workers get the right to take every second weekend off.

Russell Zimmerman, executive director at the Australian Retailers Association (ARA), said the ARA has been leading the penalty rates case for a long time and was open to working with the Shop Distributive and Allied Employees’ Association (SDA) as part of its case to Fair Work to facilitate this agreement and broaden it across the country.

“It is very encouraging to see that the SDA has recognised that the current Sunday penalty rate is too high.

“The ARA welcomes any move that better aligns penalty rates with the modern retail industry. 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.

“There is a real opportunity here to support the struggling retail sector and stimulate jobs growth. In order to create more employment opportunities for Australians, retail wages need to be flexible.

“We are hopeful that this agreement has a flow on effect across Australia,” Zimmerman said.

Business SA said the agreement significantly reduces penalty rates on weekends and public holidays, and is totally voluntary for both employer and employees.