Labour-hire firms are cashing in on the Coalition's fixation with keeping public service staffing numbers low, supplying bureaucrats who cost taxpayers more than directly employed workers but who earn up to 3 per cent less money.

The Office of the Commonwealth Director of Public Prosecutions told a Senate committee how it paid a recruitment company more money to supply about 20 workers than it would cost the office to hire the bureaucrats itself.

The public servants themselves are then paid about 3 per cent less than the men and women they work alongside each day.

The frank admission prompted the main public service union to blast the arrangement as as "an utterly ludicrous situation engineered entirely by the short-sighted policies of the Turnbull government".

Across the public service, the Coalition has ordered departments and agencies to keep their "average staffing levels", or ASL, in line with the numbers from 2006-07, the final year of the Howard government.

Fairfax revealed this month that the Commonwealth DPP, under pressure on its ASL, was planning to recruit lawyers through labour-hire companies to help in its work bringing terrorists, child-sex offenders and other serious criminals to court.

But a Senate committee was subsequently told the jobs of about 20 administrative workers had already been outsourced as managers tried to satisfy the government's political demands and trim the office's average staffing level to the 2007 level of 390 workers.

The office's director, Sarah McNaughton, told the Senate's legal and constitutional affairs committee about 20 administrative staff were being supplied by labour-hire firms.

Labor senator Murray Watt asked Ms McNaughton if each of the labour-hire workers, who are mostly on contracts of less than 12 months' duration, were cheaper or more expensive than directly employed public servants.

"It's more expensive," Ms McNaughton replied.

The director said her office had turned to the arrangement partly to satisfy government demands on average staffing levels and partly to maintain workforce "flexibility".

But Community and Public Sector Union deputy secretary Melissa Donnelly was scathing of the "bizarre" workplace arrangement.

"Contract workers are paid less but end up costing more because of private labour-hire firm fees," Ms Donnelly said.

"So it is more expensive, not less, for the CDPP to hire contract workers than to keep or employ a public sector worker.

"Slashing staff numbers because of a government cap on staffing levels but then hiring contract workers at even more cost – is just ridiculous.

"The CDPP is a critical agency that protects the community by prosecuting serious crimes and the community wants to see their incredibly important work properly supported, not undermined by these kind of arrangements.

"The government needs to abandon this policy of imposing staffing limits, it makes no financial sense and it fails to ensure agencies like CDPP have the resources they need to do their important work."