Hundreds of jobs are at risk at Labour-controlled Cardiff council after it said it will taxe the axe to its personnel, payroll and IT departments.
Unison and GMB said it was an "absolute bombshell."
Handing the work to privateers could cost the council an extra £1.1 million a year.
GMB Cardiff branch secretary Ken Daniels said that in the "worst case" hundreds of council workers would be made redundant.
"Industrial action is the last resort, but if that is what my members want then that is what we will do," he said.
And Unison regional organiser Steve Belcher called it "a real kick in the teeth."
He said: "Public services are best delivered 'in-house' by council-employed staff.
"When services are outsourced they are very difficult to bring back in house when the whole project proves to be a mistake."
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