Premier Barry O’Farrell said he expected a 20 per cent reduction in the number of senior and middle managers within three years after the changes were fully implemented.

There are currently 3884 senior and middle managers working in the public service.

Mr O’Farrell said the changes to the senior and middle management would create "a more professional public service".

"We want an innovative, professional and accountable public service which encourages and rewards performance and delivers the best possible frontline services for local communities,” he said. "The NSW Government wants to reward talent, not time, in the public service."

Under the existing system, senior managers are employed on five year contracts making it difficult for the government to terminate their employment earlier if they are not performing.

The new system would provide an ongoing contract which was conditional on senior managers meeting performance benchmarks.

The government will also removed some levels of management to streamline the public service because it has found that under the current structure, there are some managers with no people to manage.

About 16 per cent of executive staff do not manage any people and, of those who do, around 30 per cent only manage one to three people.

Mr O’Farrell said a typical manager should oversee more than six people.

Cabinet has accepted the changes which also include reducing multiple layers of management and tightening procedures to "quickly and fairly deal with poor executive performance".

Government executives in different agencies would be brought under a single Act of parliament.

NSW Police, teachers and local health districts would be allowed to retain some independence.

Mr O’Farrell said research by the Public Service Commission had found the number of senior officers had increased from 280 in 1999 to more than 1,600 in 2012.