The Irish National Organisation of the Unemployed (INOU) said it is very concerned at the doubling of the penalty rate for people on a jobseeker's payment.
As part of the Social Welfare Bill, the Government is proposing raising the penalty rate for people who do not engage with employment services to €90, from the current rate of €44.
The INOU said that under the new proposal, a single person on the maximum Jobseeker's Allowance rate could be left trying to survive on €154 per week.
The organisation said that penalties should only ever be used as a last resort.
"Proactively supporting people who are vulnerable in the labour market would be a more constructive way to proceed, seeking to assist people to make meaningful choices," the INOU said.
The organisation said that while Ireland is technically at "full employment", this is an economics term and does not mean that everyone who is seeking employment will find it, as there are many barriers to entering the labour market, including duration of unemployment.
The Social Welfare Bill came before the Seanad this week and in her contribution to the debate, Minister for Social Protection Heather Humphreys said reductions in jobseeker's rates are intended to encourage compliance with the requirements for jobseekers to be available for and genuinely seeking employment.
"Reduced rates are only applied if a jobseeker does not engage with the State's employment services," Ms Humphreys said.
"Prior to application of the reduced rate, the jobseeker will receive at least two notifications inviting them to engage or to offer a reasonable explanation for their inability to engage," she added.
