The intention is not to cut overall funding, the GMB's leader says
The GMB union has voted to cut funding to a third of the 108 Labour MPs it sponsors, saying they have failed to back its policies.
It also said it would ask its 600,000 members if they wanted to reduce the £1.2m funding for the Labour Party.
The union discussed its links with Labour at its conference in Plymouth.
General secretary Paul Kenny said he had been "weighing" up the performance of MPs, who could lose up to £20,000 a year if funding is cut.
The union was no longer prepared to finance MPs who treated workers with "contempt", he added.
The vote came as fire-fighters, prison officers, teachers, civil servants and other public sector workers joined a TUC rally in Westminster to press the government to make sure their pay keeps up with the rising cost of living.
Outlining his members' grievances, Mr Kenny said those targeted would be MPs who had failed to support union policies, had not responded to requests for help or had not engaged with local branches.
"The intention is not to cut funding overall; it's to divert it to areas where frankly people are doing a job of work," he told the BBC.
"The government is very keen on testing for everybody, performance-related pay, and we've applied in the GMB over the last 12 months exactly the same principle.
"We've examined the records of MPs both at local level and national level and many are doing a fantastic job, but there are a number who seem at times to be embarrassed by their relationship with the union.
"We don't want to embarrass them by giving them union money."
Instead the GMB plans to put more cash into encouraging its members to take more control over constituency parties so the union has more influence over party policies.
Mr Kenny also warned the union could scale down the size of its funding for Labour - although it has ruled out of order a motion urging the GMB to disaffiliate from Labour.
He said he expected there would be "huge anger" among delegates over policies on taxation, public sector pay, executive bonuses, social housing and other issues.
One motion called for the GMB to give an ultimatum as to whether to give continued support to Labour because of unhappiness about the so-called Warwick Agreement - the deal reached before the last election between unions and the party - has not be implemented in full.
Another motion said: "The congress notes with disgust the continuing failure of the Labour Government to adequately represent the interests of working people."
The Labour Party has become more reliant on union funds as donations from individuals have dropped following the cash-for-honours row and falling opinion poll ratings.
The TUC rally comes after a survey of 2,100 adults suggested that most believe it is unfair for public sector workers to receive lower wage increases than staff in private firms.