Up to 25 jobs will be cut from Coniston-based superannuation company Mercer Administration - formerly Pillar - unless the NSW government intervenes.
Affected staff were informed about the decision at the Old Springhill Road office on Monday morning, according to the Community and Public Sector Union (CPSA).
Assistant state branch secretary Troy Wright said the action by global investing firm Mercer - which bought the former state-run Pillar in 2016 - was a "direct contravention" of the terms of sale.
"The NSW government guaranteed that jobs and services would be retained in the Illawarra for 10 years - yet just a few years into that guarantee Mercer is already looking at removing jobs from the area," Mr Wright said.
"That's why I have written to Treasurer Dominic Perrottet to ask if he will enforce the terms of sale, how he intends to do it and that we expect him to do it.
"There was a promise made to us, our members and the people of the Illawarra that these jobs would stay. It goes to show that when organisations are privatised, a guarantee by government means nothing."
Mercer bought Pillar for $35 million in December 2016. At the time then Treasurer, now Premier, Gladys Berejiklian, said the government recognised the importance of keeping jobs in the region.
"Pillar is a major employer in the Illawarra - that is why the government has secured the commitment of Mercer to maintain and ideally grow Pillar's operations in the region for at least 10 years," she said.
However Mr Wright said Mercer had recently informed the union that it would seek expressions of interest for voluntary redundancies as part of a reorganisation of its Illawarra-based operations.
In particular, the company told the CPSA that the administration of services to one of its clients, AON, would be better placed in Melbourne.
Wollongong MP Paul Scully called on the state government to "honour its guarantee".
"This was the exact reason that Labor opposed the privatisation of Pillar, and sought a five-year job guarantee and 20 year commitment to the region," he said. "That was rejected.
"The government instead guaranteed existing services in the Illawarra would continue for 10 years. It seems that guarantee wasn't worth the legislation it was written on."
CPSU Illawarra organiser Bart McKenzie said it was another blow for the region: "Jobs in Wollongong can be hard to come by - and we doubt that any job that goes out of the region will ever come back."
A Mercer spokesperson said the company made every effort to be transparent with staff and their union.
"As we review our service delivery model for one of our key clients to determine the scope of the changes, (on Monday) morning we spoke openly with colleagues who may be impacted, including them in the conversation and giving them the opportunity to express their interest in potential redeployment opportunities, development and training or voluntary redundancy," the spokesperson said.
"We maintain our long term commitment to the region and continue to invest in our operations in Wollongong. Any changes to roles are unlikely to take effect until early 2020."
A NSW Government spokesperson stated: "The NSW Government will monitor the proposed changes and ensure obligations stipulated in the Act are honoured."