The bank has met targets on repaying a £26bn government loan
The decision to award most staff at nationalised bank Northern Rock a 10% bonus is "indefensible", the Liberal Democrats have said.
Treasury spokesman Vince Cable said: "This is bringing the worst of the City bonus culture into a public body."
But the Unite trade union argued the bonus, which follows an agreement with the Treasury, was a fitting reward for "hard work and dedication".
Gordon Brown's spokesman said it was a "matter for Northern Rock".
The bonuses are due to be paid to staff on Friday.
Northern Rock was nationalised in February 2008 after a run on the bank in 2007.
Once Britain's fifth-biggest home loan provider, it was taken into public ownership after it failed to find a suitable buyer from the private sector.
HAVE YOUR SAY
I certainly wouldn't be happy with a pay cut, but it beats redundancy!
Cindy Chaplin, Coggeshall
A Northern Rock spokesman refused to be drawn on how much money was being paid out, but pointed out that the staff-wide bonus scheme had been announced in October.
He also stressed that no executives or senior management would benefit.
The reward comes after staff met targets on repaying the bank's £26bn loan from the government.
'Step in now'
Mr Cable said: "This is an extraordinary action from a state-owned bank which still owes billions to taxpayers.
"When millions of people are facing pay cuts or even unemployment, this is indefensible. The government should step in to stop this now."
But Unite national officer Rob MacGregor said: "Unite members and staff at the bank have worked exceptionally hard in extremely difficult circumstances.
"They have experienced the loss of friends and colleagues through compulsory redundancy yet have continued working solidly with dedication and commitment.
"These have been very difficult times and this bonus agreed with the Treasury was promised if targets were met. Their dedication and commitment has meant that they have not only achieved but exceeded the targets set."
Asked whether Mr Brown approved of the bonuses, the prime minister's spokesman said: "Northern Rock, as I think is well known, has repaid its debts to the government at a rate faster than originally planned for.
"Operational decisions such as this are a matter for Northern Rock."