Industrial umpire the Australian Public Service Commission has moved to stem a ballooning bill for big redundancy payments for 16,500 public servants being jettisoned by the Abbott government after it quietly relaxed rules for public service recruitment.

As the massive job cuts start to bite, agency heads have been told by the APSC they will need to put ‘displaced’ APS staff at the front of the line for vacant positions ahead of other public servants in safe jobs that might otherwise apply for the positions.

The new rules have come into place as figures in the Final Budget Outcome released on Thursday by Treasurer Joe Hockey and Finance Minister Matthias Cormann revealed that the government’s total wages bill dropped by $709 million in the 2013-2014 period while redundancy payouts soared to a reported all time high of $580 million.

The stampede for the exits at some agencies, especially the Australian Taxation Office, is financial and human resources headache for both ministers and senior mandarins because the strong potential to disrupt budgets and the delivery of programs.

While the APSC has persistently denied it had put a hiring freeze in place for the APS, the effect of post-election controls on recruitment into agencies has proven increasingly difficult to manage.

The ugly financial numbers now appear to have prompted a temporary rethink of how the government’s hardline stand on public service reductions is best manage before conspicuous cracks start appearing.

Under the updated “Interim arrangements for recruitment in the Australian Public Service” agencies have been told they should first hire from the pool of displaced APS staff but can also hire from outside the pool if they first satisfy a swag of compliance checks before advertising positions as open to anyone else but the displaced.

“The Government has agreed to streamline some of the operational aspects of the arrangements, without diminishing their effectiveness in meeting the target,” the APSC guidance said.

“The APS Commissioner’s Directions 2013 were modified in November 2013 to require agencies to gain the APS Commissioner’s agreement before vacancies are advertised externally as open to all eligible members of the community. Promotions will continue to be available for ongoing APS employees where the vacancy was advertised only to APS employees. The amended Directions will remain in place.”

It is understood that increasing numbers of senior public servants are privately cautioning that overly dogmatic adherence to the administration rules of the labour shedding program could produce sub-optimal outcomes in terms candidates for some positions.

One fear is that as staff who can find lucrative alternative employment in the private sector – like at Tax – hit the exits, opening will be filled by less motivated and productive staff.

Ministers are also feeling the effect of the freeze, especially where there is a desire to recruit private sector expertise into senior APS ranks to shake-up thinking and innovation around operations without resorting to wholesale outsourcing or buying in advice from consultants at premium prices.

Australia’s elevated national security threat level is also playing into the level of cuts made by both the Abbott government and state governments, with calls overnight from a number of police associations for better resourcing to protect officers and allow them to execute their duties effectively.

Earlier this week the union representing prison officers in NSW hit out at prison overcrowding and officer to prisoner ratios as serious safety and security risk for its staff following a riot at Goulburn jail.

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