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Thousands of finance and insurance company workers will be among those to experience an immediate pay cut in January as a result of a ruling by the Australian Industrial Relations Commission.

The commission decided yesterday that wage increases under a shift to a new awards system would be phased in over five years but the loss of other job conditions and allowances would be immediate.

The commission admitted that the overhaul of the system would leave some employers and employees worse off, though the Minister for Workplace Relations, Julia Gillard, had given assurances that this would not occur. In the new system, which comes into effect in January, thousands of state and federal awards will be condensed to fewer, simpler, "modern" awards.

Yesterday the commission released a model of the new system to cushion the blow of the transition. But business groups and unions said the change would cause "a considerable sting" for employers and "unfair losses" for workers. The commission said: "It is clear that some award conditions will increase, leading to cost increases, and others will decrease, leading to potential disadvantage for employees."

The commission ruled that the first wage and penalty rate rises would be delayed for six months until next July and then be phased in in equal instalments every year for five years. This will benefit retailers in NSW, which face paying higher penalty rates. But changes to other conditions, including hours worked and allowances, will take immediate effect.

The director of workplace policy for the Australian Chamber of Commerce and Industry, David Gregory, said: "The decision emphasises there will be impacts for many employers, particularly those covered by the state-based system moving to the federal framework, and there will be cost increases to many employers."

He said this was "disappointing, given the assurances from government that the process was not about imposing additional costs". The chamber's concern that only a limited number of provisions – wages and penalty rates – would be phased in over five years was shared by unions.

The national policy director for the Finance Sector Union, Rod Masson, said the union would seek an urgent meeting with Ms Gillard over the effect on insurance workers. "We are absolutely shocked by it. Having thought that transition arrangements would make sure no employee was worse off, we are unsure that safeguard stands."

At present, insurance company staff are guaranteed a minimum of four hours' pay if they are called to work on Saturdays, but this will disappear under the new award.

Meal allowances would also end, and part-time workers would lose guarantees of minimum hours worked, he said. The ACTU secretary, Jeff Lawrence, said it was disappointing that thousands of low-paid workers would have to wait five years to see the full benefit of a lift in their award wages as a result of a "scurrilous campaign" by employer lobby groups.

Mr Lawrence said the take-home pay of many workers would be cut through reductions in allowances and changes to job conditions. "This immediate loss for workers from January 1, 2010, unfairly contrasts with the five-year phase-in for rises in wages and penalty rates," he said.

The chief executive of the Australian Industry Group, Heather Ridout, said the transition model was sensible and welcomed the delay in wages rises, but said the group needed to study the impact on each industry.