Probe Group chief operating officer Jarrod Kagan told a Sydney hearing of the inquiry into the "robo-debt" system his company was paid commission where it received a percentage of the debts it recovered for Centrelink, but no base rate.

The payment arrangement was different to that used by another agency engaging Probe to collect payments, the Australian Taxation Office, which used a flat payment rate.

Mr Kagan said the DHS' payment arrangement was typical of that used for debt collection services by banks, energy retailers and telcos.

But he did not say what percentage his company received in payment from debts it collected for the department.

He said that Probe set key performance indicators for staff collecting debts for Centrelink according to its agreement with the DHS, and referred cases back to the department if it could not collect money from clients.

"Typically the KPIs that we would set would reflect what the KPIs in the deed of agreement would be. Plus we also have a range of internal KPIs that would reflect what is important to us as an organisation," Mr Kagan said.

Australian Privacy Foundation chair Kat Lane said automated debt recovery methods breached the federal government's own privacy guidelines.

Ms Lane said it was disturbing the government appeared to have decided the voluntary guidelines issued by the Australian Information Commissioner "didn't apply".

DHS service leader in Sydney Scott Chant said its service centres were told to direct people asking about the data-matching program to a phone number or an online portal.

"Our role was to facilitate the person through to the right officer," he said.

"We want to get the recipient through to the people who have had the training and the skills for that purpose."

DHS representative Marc Mowbray-d'Arbela said it didn't believe reports that staff were directed to ignore errors, or that it issued a direction adding to stress, were correct.

Reports there was a significant increase in staff stress were "not borne out by the facts", he said.

Acting Commonwealth Ombudsman Richard Glenn told the hearing robo-debt recovery methods were not working well before a critical audit was launched by his office.

A report released this month found Centrelink's demands on former welfare recipients were neither "reasonable" nor "fair".

"If you talk about the system as part of a process that needs to be implemented and rolled out to real people to use, it didn't work well at the beginning and it is working better now," Mr Glenn said.

"I certainly think that the recommendations that we have made and that the department has accepted set the foundation for it to be working well but in all of these situations, the only test is to see it working and to see how people react."