British Waterways has announced it will make 60 staff redundant and instigate a company-wide pay freeze in the financial year to March 2012.
The government body, which is working towards attaining independent charitable status in the second half of 2012 and has 1,700 staff, said the cuts were the result of a £10m cut in its government grant.
Julia Long, national officer for docks and waterways at the public sector union Unite, said that as part of British Waterways' transition to the third sector, existing maintenance staff could be replaced by volunteers or the long-term unemployed, paid the equivalent of £1 an hour through Jobseekers Allowance.
"British Waterways should not be abolished and turned into a charity, employing volunteers on no or minimum wages," she said.
British Waterways said the cuts would take place among office staff, not "bank staff" responsible for waterways maintenance.
"This move has nothing at all to do with our transition into the third sector," said a spokesman. "It has been forced on us by the financial position we are in.
"While it is true we are promoting more volunteers on the waterways, we have stated categorically that we will not make anyone redundant as a result of volunteering, or indeed replacing staff with the long-term unemployed."