Shoalhaven City Council will change how it processes recycling from July 1, and the decision is a contentious one.
Shoalhaven Recycling, who have not had their contract renewed, say the decision will send jobs and money out of the region.
General manager Benn Hobbs said four employees had decided to leave after he broke the news.
The remaining employees have been negotiatied back to four-day weeks as the business looks to diversify and prevent further losses.
"We employ a lot of people other companies might not give a go," he said.
"The industry has been tough the past few years, but we spend as little as possible outside the area and try to keep money in the community."
However, the council says the cost of continuing Shoalhaven Recycling's contract is too high, blaming the introduction of China's sword recycling import restrictions in early 2018.
"Council have gone to great lengths to work with and support Shoalhaven Recycling over the last 27 months while buffering the community from the cost impact," a spokesperson said.
"Council has developed plans to operate a state-of-the-art materials recovery (recycling) facility in West Nowra which will retain and create jobs in the Shoalhaven."
The facility will not be operational for some time however. Until it becomes operational, the council has awarded the recycling tender to a business outside the Shoalhaven.
"Council invited tenders to process the materials from the yellow recycling bin," the spokesperson said.
"The tender process is robust and transparent and includes an allowance for local content. Unfortunately, Shoalhaven Recycling were unsuccessful."
The spokesperson did not identify the company that had been successful in securing the tender.