A union has warned that hundreds more jobs could go and water quality could be affected after Scottish Water cut 900 jobs.
The redundancies will be voluntary
Public sector union Unison made the claim after Scottish Water revealed the decision to shed the staff to cut costs by £100m.
Of the 6,000 staff who worked for the three previous water authorities before they were merged into Scottish Water last year, less than 4,000 will be left.
The publicly owned body said it needed to cut jobs to meet its industry regulator's recommendations.
But Unison's utilities spokesman Dave Watson predicted the process could go further, claiming 600 more jobs could be under threat.
"If you take half the workforce out of the industry it is inevitable that staff will be struggling to provide clean, wholesome water or the safe and environmentally sustainable disposal of sewage," said Mr Watson.
The company said there will be no compulsory redundancies.
But it has confirmed it is possible there will be more job losses in future, with a further 600 posts a matter for planning and discussion in coming years.
Opposition parties say the job-cutting proves that the Scottish Labour Party wants to privatise Scottish Water.
But Labour has dismissed the claims as "absolute nonsense".
Geoff Aitkenhead, asset management director for Dunfermline-based Scottish Water, said staff and unions had been made aware of the job losses.
He said job cuts would take effect immediately for those who accepted the voluntary severance package.
"We're anticipating a level of uptake for the scheme that will result in 900 people leaving the business in the coming financial year," he said.
The deal amounts to an early retirement package for the over 50s and a payment based on years of service for the under 50s.
Mr Aitkenhead said the move by Scottish Water, which was formed in April 2002 and employs 4,700 people, followed a report by the industry watchdog.
"We made the decision after a review of the three previous authorities by the Water Industry Commissioner for Scotland, who found there was significant scope for reducing operating costs," he said.
He said any job losses were "regrettable".
"But we are now working with staff and the unions Unison, the GMB, the TGWU and Amicus to implement this redundancy scheme," said Mr Aitkenhead.
Bruce Crawford, of the Scottish National Party, accused the Labour-Liberal Democrat coalition of plotting to sell off Scottish Water.
He said: "This smacks of preparations for privatisation.
"Scottish Water would be far better in delivering quality service to its customers and avoiding such outbreaks of cryptosporidium as we saw in Glasgow last year than preparing for privatisation.
"This now raises very real safety fears."
But a Labour Party spokesman said: "This is Scottish Water's attempt to become more efficient and more effective and to keep bills low so that it can remain in the public sector.
"It's not privatisation by the back door by any means whatsoever".
Unions say a further 600 jobs could go
The Scottish Tory party welcomed the move.
A spokesman said the party had proposed that Scottish Water should become a mutual company to improve efficiency and cut bills for Scottish customers.
"Scottish Water must operate on a competitive basis where high quality service is based on value for money," he said.
Scottish water industry commissioner Alan Sutherland said that without the savings consumers would have been facing price rises of 72% by 2006.
He added that it was a matter for Scottish Water management how to achieve the targets but that customers had a full right to expect that services would not be compromised in any way.