Bernard Matthews has laid off 130 workers just days after insisting that all jobs were secure in the wake of the bird flu outbreak at its Suffolk farm.
The turkey food producer said the employees would be stood down for 20 days with a one-off payment of £100.
A spokesman for the company added that up to 500 more employees may be laid off, after sales dropped by 40% since the disease was discovered at the start of this month.
The Transport and General Workers’ Union (T&G) insisted the government must compensate the affected workers. It said other European countries had supported workers affected by bird flu outbreaks.
Chris Kaufman, T&G national secretary, said: “The UK government should act in the same way as the Spanish and Italian governments did in similar circumstances. Industry will need the full backing of its government as it faces a challenging period.”
About 160,000 turkeys were killed at the farm in Holton when an Asian strain of the deadly H5N1 virus was identified. Many workers were initially sent home on full pay but assured their jobs were safe.
A Bernard Matthews spokesman said: “This was a very difficult decision to make but under the current circumstances it was the only option available following the drop in product sales.
“We are also doing everything we can to limit the number of job losses and we are working hard to restore consumer confidence.”
T&G said that the workforce has displayed “real resilience” since the outbreak and was determined to work for a positive future for the company.