By Zac Street, produced for online by Mitchell Ogden.

Business groups are lobbying for Fair Work Australia to abolish weekend penalty rates for hospitality workers.

They say the rates are having a crippling effect on the industry.

Currently hospitality staff who work on a Saturday receive a 25 per cent penalty, and 50 per cent on Sunday.

Restaurant and Catering Australia CEO John Hart says many shops are opting to close on weekends.

“Businesses that are forced to pay penalty rates on these days are forced into a situation where they are facing days that are not profitable, and therefore increasingly closing on those days,” he said.

He says the current award is out-of-touch with modern lifestyles.

“The vast majority of people in the industry are working other days of the week, for instance Wednesday to Sunday,” he said.

“Therefore penatly rates should not automatically apply on Saturday and Sunday.”

Ralph Stamos, owner of Three Monkeys Cafe in West End, says excessive penalty rates are driving up labour costs, which leads to higher prices for customers.

“All of my friends in the industry are saying that they cannot possibly open on weekends unless they start charging seven or eight dollars for a cup of coffee,” he said.

But Louise Tarrant, national secretary for union United Voice, says penalty rates are entrenched in Australia’s industrial relations landscape.

“At the end of the day, our community has a view that if people work weekends they should be compensated,” she said.

She says previous attempts by businesses to cut penalty rates have failed.

“The industry has argued this case many times before and never have these arguments been accepted,” she said.

Fair Work Australia will complete its review of the hospitality industry award in July.