Up to 1,800 Midland jobs are at risk after the Government announced it was abolishing the Dudley-based Child Support Agency.
Ministers said they did not know how many positions would be lost when the CSA was replaced with a new, streamlined agency.
The national headquarters, in Brierley Hill, Dudley, employs 1,800 people alone.
But Work and Pensions Secretary John Hutton announced it is to close after 13 years, in which it has constantly been at the centre of controversy.
Black Country MPs demanded details of the effect on staff last night.
Lynda Waltho (Lab Stourbridge) said: "My constituents are concerned about what may happen to them and their jobs."
Replying in the House of Commons, Mr Hutton said: "We will be working very closely with the unions."
Officials said it was too soon to tell how many jobs would be lost. It would take many years for a new agency to be created, he said. Parents will be encouraged to make their own arrangements in future, so that a new streamlined agency can concentrate on chasing payments from fathers.
There will be new powers to impose curfews on errant fathers to prevent them going out after work.
They also face having their passports confiscated to stop them taking foreign holidays.
The proposals were announced in response to a review of child support arrangements by Sir David Henshaw, whose report was published yesterday. He called for the CSA to be replaced by a new which will not handle payments for all parents.
Mr Hutton said the over-haul was needed after the CSA's attempts to force noncompliant parents to support their children had failed.
He said: "I think we need a radical shake-up because it is letting down too many families and kids.
"The incentive has got to be there for people to reach a decision themselves.
"If they can't, we have got to get a much more effective enforcement agency which provides better value for money for the taxpayer."
Mr Hutton said it was vital that estranged parents were encouraged to reach an agree-ment between themselves before a government agency became involved.
Stories of mistakes and inefficiency have dogged the Child Support Agency (CSA) almost since its inception in 1993.
From day one, problems with its computer system put the agency under pressure as employees struggled to cope.
Today, debts of about £3.5 billion remain to be collected, a figure that campaigners say increases by £120 million each year. The National Audit Office warned last month that reforms introduced in 2003 had so far cost the taxpayer £536 million but had not produced significant improvements.
This figure was expected to rise to £800 million by 2010.
A damning report report revealed it now costs the agency 70p to collect just £1 in child support.