Up to 12,000 public servants could lose their job under planned savings by the New South Wales government, their union says.

Behind the surplus revealed in Treasurer Dominic Perrottet’s budget on Tuesday was an increase to the annual ‘efficiency dividend’ on government agencies.

The rate will be lifted from 2 to 3 per cent for four years, clawing back savings of $1.6 billion.

The Public Service Association on Wednesday said the “time bomb” would lead to 11,799 redundancies within a year, a claim Mr Perrottet and Premier Gladys Berejiklian rejected.

“In the end it will be the people of NSW that suffer,” PSA secretary Stewart Little said in a statement.

“Unless this decision is reversed immediately, the legacy of the Berejiklian government will be understaffed jails, people with severe disabilities on the streets, degraded national parks, struggling schools, and vulnerable children neglected, hurt, or worse.”

The efficiency dividend means public service departments will have to cut costs 3 per cent each year. Mr Little said 3 per cent of the sector equated to 11,799 jobs.

“Childcare workers, prison guards, park rangers, teachers assistants, disability carers – thousands upon thousands are going to be sacked over the next year so their departments can make budget.”

Ms Berejiklian on Wednesday told reporters his claim was “rubbish”.

Mr Perrottet said the government had $76.5 billion in expenses and needed to find savings.

“It’s about making sure that we find savings and efficiencies across government,” he said.

“Any good government makes sure they do that because it’s not our money, it’s taxpayers’ money.”

He said he wanted “less middle managers in the public service and more teachers, more nurses and more coppers”.

Frontline staff increased by 8009 between 2011 and 2017, the budget said, while non-frontline staff numbers fell 12,111.

Mr Perrottet claimed “never before” had a state budget delivered so many frontline public servants, noting the boost in funding for extra nurses and midwives, doctors, police, paramedics and teachers.

Labor Shadow Treasurer Ryan Park described the efficiency dividend as a “blunt instrument”.

“Key public sector workers deserve better from this government.”

The government also kept its 2.5 per cent cap on wage rises for public servants.

-with AAP