Hundreds of workers at Australian Sustainable Hardwoods (ASH) in Victoria's east have been told they could be out of a job by September.

The sawmill at Heyfield, in Gippsland, employs about 250 people, and processes 150,000 cubic metres of timber, bought from the state-owned logging company VicForests.

The mill has no timber supply locked in beyond June, and VicForests has offered a short-term contract at half the current volume.

ASH said the mill could not operate sustainably without a long-term supply deal, and unless that is negotiated in the next few weeks, it would begin shutting down in September.

Workers were briefed about the issue at a meeting on Thursday.

Aaron McDonough has worked at the Heyfield sawmill for a decade. ( ABC News: Stephanie Anderson )

Aaron McDonough said it was an anxious day as staff waited to hear more about their future.

"We've got mortgages to pay, bills to pay, and everything else and you just don't know how you're going to do it," he said.

"It would just decimate the town if the mill shut down.

"There's 250 employees, it's going to affect a lot of people directly and indirectly, local businesses, even footy clubs, social events, everything. The town will be gutted."

He said the Victorian Government needed to provide a long-term contract to protect jobs.

Matthew Cassidy said the Heyfield mill was his livelihood. ( ABC News: Stephanie Anderson )

After two decades at the mill, Matthew Cassidy said it was his livelihood.

"Just recently I've had a new family, so I'm a one-income family," he said.

"So that's going to make it tough if we lose our jobs."

Like many of the workers, Mr Cassidy feared the closure would send shockwaves through the town.

"I think as time goes on the town will get smaller and smaller and people will have to move away from not only Heyfield but Gippsland to find work, and that's devastating," he said.

Getting 'harder and harder' to find work in Gippsland

Nathan Wellins said it was getting more and more difficult to find work in the region. ( ABC News: Stephanie Anderson )

Nathan Wellins said there were limited options for other work in Heyfield and the surrounding towns.

He worked at the mill for eight years, supporting a young family.

With Gippsland already bracing for massive job losses when the Hazelwood power station closes, Mr Wellins said it was becoming increasingly difficult to find work.

"Obviously with all the recent job closures locally, it's going to be tougher and tougher to find work," he said.

"In the last few years we've been hit pretty hard. Murray Goulburn stripped a lot of jobs down, so that avenue's sort of disappeared.

"Dairy farming has become harder and harder to get work in, and obviously with the power stations now cutting back it's getting harder and harder to find work."

Victorian Agriculture Minister Jaala Pulford said negotiations about timber supply were ongoing, and it was premature to speculate about the outcome.

Local federal MP Darren Chester called on Opposition Leader Bill Shorten to immediately discuss the issue with his Labor colleague, Premier Daniel Andrews.