The Morrison government has abandoned plans to allow more scope for enterprise agreements which fail the better off overall test.
Industrial Relations Minister Christian Porter on Tuesday dumped the most contentious part of the coalition's workplace reform package.
It would have allowed the Fair Work Commission to greenlight enterprise agreements that did not meet the better off overall test if coronavirus impact could be shown.
Crossbench senators raised serious concerns with the provision, meaning the bill was likely doomed if the better off over all test changes remained.
Prime Minister Scott Morrison attempted to pressure Labor into supporting the industrial relations omnibus bill.
He said the legislation ensured people would have a stronger pathway for casual conversion and introduce new penalties for wage theft.
"Is Labor going to drop the politics now and get on with it so we can get people back into jobs?" Mr Morrison told reporters.
"Or are they going to cling on to this as a way of continuing to engage in a political debate here in Canberra?"
Labor's industrial relations spokesman Tony Burke said the scrapped changes to the better off overall test showed the government's intent.
"They're only backing off because it's clear they can't get this unfair change through the Senate," he told AAP.
"But now we know what they want to do. They want to cut workers' take home pay - and if they get another chance they'll try again."
One Nation senator Malcolm Roberts, whose party controls two Senate votes, welcomed the government sinking the provision.
"This is a win for ensuring that workers will not be left worse off," he said.
Unions and Labor remain opposed to the bill because of a raft of other changes to workplace laws.
The ACTU is concerned the Fair Work Commission would be forced to sign off on enterprise agreements within 21 days.
The union peak body also argues more power would be given to employers in bargaining.
Mr Porter said the decision to dump the better off overall test changes was about working constructively with the Senate crossbench on passing the bill.
He said removing the provision blew away the smokescreen Labor was hiding behind to justify its opposition to the broader reform package.
"What Anthony Albanese has demonstrated by his refusal to even talk to the government about the bill is that he is only concerned about protecting one job - his own," the minister said.