Fletcher Insulation's Dandenong factory has been all but shut down, with a skeleton staff of about 25 'wool line' production workers out of 120 retained, says worker and union delegate Rick Kubala.

The remaining workers had been forced to take three weeks' annual leave from last Saturday, he said.

"Not one worker will be feeling safe as they go on holiday. I suspect they are trying to run down the annual leave before they bring in redundancies. Everyone's worried about the impact on installers, but nothing's been said about us making the insulation."

Australian Workers Union assistant secretary Michael Borowick said the situation left workers more vulnerable, but was more palatable than job losses.

The government's rebate scheme, linked to shonky installers, household fires and electrocutions, will be replaced by the Renewable Energy Bonus Scheme from June 1, but Fletcher and the AWU have called for the scheme to be brought forward to save jobs.

Mr Kubala said part of the blame for the shutdown was an had led to 400 surplus containers of imported Chinese product piling up at the factory and other sites in Melbourne.

"The management has stuffed up and we wear the consequences with our mortgages and families," he said.

However, Mr Borowick said the situation could be put down to the sudden end to the rebate scheme.

Fletcher general manager David Isaacs, who last month said he was "days away" from deciding on the fate of workers, did not return the Journal's calls.

Isaacs MP Mark Dreyfus, who has been in talks with Mr Isaacs, was disappointed by the shut-down.

"I am determined to keep working ... to help keep jobs in a safe and sustainable insulation industry."

Th e federal government has introduced a $41.2million support package for workers affected by the scheme's termination.