The Pandemic Unemployment Payment (PUP) for part-time workers will be slashed as part of the Government's plan to reduce the massive welfare bill caused by coronavirus.
The €350-per-week payment will be cut to €203 in line with the Jobseeker allowance paid to the unemployed.
Meanwhile, the payment for full-time workers will be phased out over time under plans being brought to Cabinet this week by Social Protection Minister Regina Doherty.
The PUP is due to expire next Monday but the Government has signalled it will be extending the emergency scheme to assist those who lost their jobs owing to the Covid-19 lockdown.
However, it is understood ministers will soon begin the process of unwinding the payment, which is costing around €200m a week.
Part-time workers are first in line to see their payment reduced by almost 40pc to €203 per week.
This will be followed by a phasing out of the PUP for full-time employees as more people return to work in the coming months.
The Government is bracing itself for a backlash over the plan, with Opposition TDs expected to criticise any attempt to reduce the payment for those who lost their jobs due to the global pandemic.
"There will be war about this but we have to do it," a senior Government source said.
There have already been clashes in the Dail between the Government and Opposition over extending the payment.
Sinn Fein has said the PUP should stay in place until the end of the year.
There are currently 543,200 people claiming the payment.
A Department of Business report recently showed almost 200,000 people are earning more on the pandemic payment than they did when they were working.
Yesterday Central Statistic Office figures showed unemployment had dropped slightly last month to 26.1pc.
However, there are still record numbers of people out of work.
Yesterday Finance Minister Paschal Donohoe said the Government was reviewing new figures on the number of people on the scheme who are now returning to work and this will inform its decision on the payment.
Mr Donohoe said he intends to "signal to our economy" how long the PUP will last and what changes will be made over the coming months.
He said the payment will be continued but added that ministers have identified "some issues".