Almost 40 jobs are “at risk” at South Holland District Council due to the end of a contract.
The Supported Housing Service helps about 1,600 of the council’s sheltered housing tenants to live independently.
The district council delivers the service under a contract with Lincolnshire County Council, which ends on September 30.
Both councils had been working on a revised contract to drive down the cost to taxpayers.
Last year the district council agreed the principle of new arrangements that would see it continue to deliver support services to its most vulnerable sheltered housing tenants, while achieving significant savings.
South Holland District Council leader Gary Porter, said: “Despite assurances that the new contract – which would have made tens of thousands of pounds of saving on the old one – would be re-let to South Holland District Council, the county council have reneged on this agreement at the eleventh hour.
“I’m angry and frustrated that we have been forced into serving notice to our staff.
“And I’m disappointed that after renegotiating the contract with the county council, they have still turned round and said no.
“However, I’m confident that the county council or its new contractor will deliver a service equal to that which the district council currently does on their behalf.”
A total of 36 staff posts are affected.
Three other local authorities within Lincolnshire are also in a similar position.