The Commission's decision will see many workers lose their double-time pay on Sundays, and replaced with a lower rate.
The unions say the government should have done more to stop what it sees as an attack on the country's lowest-paid workers, and are calling on the Prime Minister to intervene.
But proponents of the cut, say businesses will now be able to afford to open longer and employ more people.
The Fair Work Commission today delivered a cut to Sunday penalty rates many had been expecting.
Last year, the Productivity Commission argued Sundays were not the sacred day of leisure they once were.
It released a report recommending Sunday penalty rates be lowered to the same as level as Saturdays.
The Fair Work Commission President Iain Ross says the cuts don't go quite that far.
"We have not reduced the Sunday penalty rates to the same level as Saturday penalty rates. For many workers Sunday work has a higher level of disutility than Saturday work, though the extent of the disutility is much less than in times past."
Sunday double-time pay is already a thing of the past for retail and pharmacy workers.
When the changes come into effect, those working full and part-time will be paid time-and-a-half on Sundays - or a rate of 150 per cent - while casuals will receive a rate of 175 percent, or time and three quarters.
There will be no changes for casual hospitality workers.
But part- and full-time hospitality staff will move from 175 to 150 per cent penalties.
Casual fast-food workers will move from 175 percent to 150.
The head of the Australian Council of Trade Unions, Ged Kearney, says the cuts will be devastating for low-income workers.
"This decision will have a massive impact on the household budgets of so many families. Nearly a million workers will be affected by this pay cut. Their families and their budgets and their livelihoods. Malcolm Turnbull could fix this right now if he acts straight away to protect the take-home pay of every single person who is affected by this decision."
The federal government has accused the unions of running a scare campaign.
Employment minister Michaelia Cash says she has seen misinformation circulating in emails claiming penalty rates have been axed altogether.
"That is an absolute disgrace and they should be ashamed of themselves for going out and instigating such a scare campaign Sunday penalty rates stay in place."
While the unions are already holding protests, business organisations are welcoming the decision.
They argue the money they save on Sunday wages will be reinvested in new workers, and a higher proportion of full-time workers.
Peter Strong is the CEO of the small business council.
He says many workers in the affected industries are covered by enterprise agreements, not awards, so will not be impacted.
"Most people that work on Sunday will not be affected by this decision the people that work for big business Coles, Woolies, Big W, Maccas, Red Rooster, all those sorts of people. Most people who work on Sunday work there, won't be affected at all, they will notice no change whatsoever."
However, that point, too, is in dispute.
Joanne Schofield is the head of United Voice - the union representing the hospitality industry.
She says nearly everyone in hospitality is on the award, and the cuts will have a disproportionate impact on vulnerable workers.
"Workers in hospitality and retail are primarily young workers, migrant workers, older workers, people trying to get a foot into the labour market and to a career path and so it is most cruel that it is these workers that have been unfairly targeted for a pay cut.
