UPDATED 6.15PM Private Prison operator Serco has had to pay the Corrections Department $8 million.

The sum has been paid after the department took over the running of the Mount Eden Corrections Facility in December last year following concerns about Serco's operation.

It's become clear Serco was not employing enough staff at the prison, before the Government stepped in to end the private company's contract.

SEE ALSO: Serco sacked from Mt Eden contract

Corrections Chief Executive Ray Smith said the 370 staff employed by Serco are still working at the prison - and Corrections has hired more.

"We've been running with an extra 40 to 50 people here for the last nine months and that will continue to compliment the staff that are currently Serco employees".

Minister Judith Collins said the Department will now run the facility, with Serco providing staff at a cost until the end of March next year.

"There are some middle management jobs that might be lost, but the majority of the staff are going to be employed by Serco with Corrections paying their wages."

Collins said it's a pleasing outcome.

"Serco are not making any money out of this, it's absolutely a cost only basis, and Corrections is being paid $8 million from Serco to cover the costs of Corrections having to step in," she said.

Serco chief Mark Irwin said it's only right, as the Government has incurred significant additional costs.

"There were areas of performance, where under the performance management framework of the contract, we had performance payments, and we don't believe it's appropriate for that to happen, so we will be paying that back."

Irwin won't say exactly which of its obligations weren't met.

But he's admitted the problems centred on issues other than just the ratio of officers to inmates.

"There has been an increase in the muster but as I said it's not just that pure number it is also the profile of the people and some of the initial demands that go around serving the justice system more broadly".

He said the full detail will be in the Chief Inspector's report - which is currently being disputed in the High Court.

Smith said staff have been told they're still needed at the facility despite the change of management.

He said there'll be a transition over the next 12 months until the prison is run solely by Corrections employees.

"Mark and his team from Serco will provide a labour-supply contract that's cost only, it's not a profit-based contract, so we'll pay for the labour that we receive to help us run the prison through to the end of the contract and beyond that time period".

Smith said the Department will continue to run the facility.

"The Department of Corrections is going to continue running the prison beyond the end of this prison contract, but I will provide advice to the Government in due course about the options that they have with the prison going forward".

It's an arrangement Labour MP Kelvin Davis has reservations about.

"I think maybe Serco should just cut it's losses and hand the whole thing back over to Corrections and let Corrections start again from the beginning".

Davis said it confirms the privatisation experiment has been a complete failure.

This company that is apparently a state-of-the-art organisation that can run prisons has now become little more than a labour-hire company. I just think that's ridiculous, in fact it's a joke".

The Public Service Association said other state prisons in Auckland suffered when staff were sent to take over the Serco-run Mt Eden prison.

National Secretary Erin Polaczuk said the debacle has cost not only the corrections department, but the safety and well being of the offices working inside prisons.

"The fact that they were called in to bail out Serco and what was going on at the Mount Eden, at the same time as the unanticipated growth in prisoner numbers across the country, definitely led to a strain within the service".

Ms Polaczuk hopes Corrections Minister Judith Collins will treat the incident as a cautionary tale.

"I think they've learnt their lesson that Serco and other companies like it which try to make profit from public services and can't be trusted and cant deliver the best for the people who work in those services or the people who rely on them".