A Guernsey Health Department workshop, which provides sheltered employment, is set to close in October.
The facility, which opened in Collings Road in 1995, is part of the Adult Disability Services and its closure is expected to save about £200,000 a year.
It provides jobs for people with mental health issues and currently has seven people who attend.
A Health Department spokesman said they would help the current workers and two staff find alternative employment.
The closure followed news the landlord would not renew the lease when it runs out at the end of October and the department decided against finding an alternative site.