Employing staff through labour hire is needed to keep service delivery standards and stay within the average staffing level cap, Department of Human Services boss Renee Leon has said in a frank admission.
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More than 2000 contractors are now working at the department, which has an ASL cap for 2018-19 of 27,307.
"We don't want to let our service levels drop, so if we were just to allow our staffing levels to drop to the ASL cap then there would be an impact on service. So we are engaging staff by other means so we can continue to provide the service that customers want," Ms Leon said at Senate estimates.
The department was grilled about the use of contractors on Thursday night at Senate estimates, with Labor's Lisa Singh and Murray Watt asking why the work wasn't done by public service staff.
"We have labour hire in many places throughout the department and will continue to look at what is the appropriate form of engagement for many functions going forward," Ms Leon said.
While the senators argued that using labour hire was more expensive, the department said it was more cost effective to use staff from external agencies for work that is expected to reduce over time.
Comparing the cost of department staff with contractors wasn't as simple as directly comparing the cost of a contract with the wages of departmental staff, senators were told.
Ms Leon said using contractors for low-skilled work that was considered to be at APS1 level freed up departmental staff to do other more complex tasks.
Department officials confirmed two contractors would be starting in Hobart on Monday, and up to 10 could be used if the program was considered to be working. The staff would be converting documents such as registrations to become organ donors, and other health-related work which is yet to be digitised.
About 1000 labour hire staff have been contracted since the start of 2018 to work in compliance, along with staff working on the IT transformation of the department's payment systems.
Between July 1 and August 31 this year $8.41 million had been spent on contractors for tranche three of the Welfare Payment Transformation program, the committee was told.
Some $72 million was spent on contractors on tranche one and and $76 million on contractors on tranche two of the massive IT overhaul, which began in 2015 and is scheduled to finish in 2022. Contractors were chosen for the work because the reform wasn't core business of the department, Ms Leon said.
