Washington, Dec 5 (IANS): US Defence Secretary Chuck Hagel has announced plans to cut Pentagon staff by 20 percent, which would save $1 billion from 2014 to 2019.

Hagel said Wednesday the cuts, first announced in broad terms earlier this year, will first start with his own staff and shed about 200 workers from a team of 2,400, reports Xinhua.

"With the Pentagon confronting historically deep, steep, and abrupt spending reductions after a decade of significant budget growth, there is a clear need and an opportunity ... to pare back overhead and streamline headquarters across this department," he said.

But the biggest chunk of the budget savings would come from cutting back contracts with the private companies, as Hagel admitted reductions to civilian personnel would only represent "a small percentage of the sequester-level cuts". According to the Pentagon, the cuts will happen even if Congress ends sequester, or automatic budget cuts mandated by the Budget Control Act of 2011.

The Defence Department is one of the largest federal agencies, with an annual budget exceeding $500 billion and a civilian work force of 800,000. But it is facing deep spending cuts under the new budget circumstances. The first round of sequester cuts kicked in March, shaving off over $40 billion from the Pentagon's budget of the 2013 fiscal year, which ended in September.

If the Congress cannot reach a deal before Jan 15, 2014, a second round of sequester will cut another $55 billion from defence budget.