Its president Datuk Seri Ramli Yusuff said this would mean that 800 security companies now engaged by the government would have to close shop.
"This will also mean that 40,000 school security guards and 10,000 support staff will lose their jobs.
"We have not heard anything from the government on the validity of the speculation.
"There will be huge consequences to the industry if the Finance Ministry decides to proceed with it,” said Ramli, strongly opposing such a move.
Ramli added that PIKM had sought clarification from the Finance Ministry, Education Ministry and the Public Service Department, but had yet to receive a reply.
According to him, several of his members had heard that the security guards would be employed personally by the schools under a Contract for Service (CFS) agreement.
Security guards employed with CFS, he said, did not necessarily need to be trained and qualified for the job.
Those under PIKM would have undergone courses and training and their background would have been checked for criminal records, Ramli added.
"Conducting courses and training for security guards can be costly," he said.
Ramli said it is believed that the Finance Ministry's action to introduce the CFS was to cut costs following budget constraints.
"We cannot compromise the safety of students and teachers, therefore we need guards who are qualified," he said in a press conference to address the issue.
Ramli also said that if the CFS is introduced for security guards in the education sector, there is a chance the government would introduce it in other sectors in future.
“Most security guards fall under the B40 group and it is upsetting that they could lose their source of income through this policy.
"Losing their jobs will also contribute to the rise of the unemployment rate and social problems in the country," he added.
PIKM vice-president (1) Mej Gen Datuk Mohd Yunus Long said security guards played a crucial role in providing security in the country.
"They are the third line of defence after the military and the police. Without them there will be lots more social issues.
“There is still no black-and-white on the CFS, therefore we are taking this opportunity to ensure the Finance Ministry does not implement the policy,” he said.