Glenn Muclaire’s £100,000 a year contract with the News of the World was the most “cost-effective” method of paying him, a court heard.
Former News of the World managing editor Stuart Kuttner told police in August 2011 Mulcaire’s contract was a “chunky sum of money to anybody”.
The Old Bailey heard that 73 year-old Kuttner thought mobile phone communications were secure.
He told police: “Perhaps naively until the arrest of Goodman and Mulcaire I did not know such a thing was possible and if it was possible I certainly did not know what the mechanics of it were."
Commenting on Mulcaire’s contract, Kuttner said: “It's £2,000 a week in a departmental budget probably running in to several hundred thousand pounds a week," he said.
Kuttner suggested "it is a lot of money but if it is a lot for the services he was providing – I do not know."
The jury was told of two new names – Jane Street and John Jenkins – under which Mulcaire received payments from the NOW. He was also paid under the names of Alexander, Paul Williams and Matey.
On his own bonus payments, he said: "I do not know I ever received £20,000 – maybe £10 or £15 or something."
Kuttner said he has been in poor health recently which includes being treated in hospital twice, having two heart attacks and suffering a brain stem stroke.
Kuttner, of Woodford Green, Essex and former NoW editor Andy Coulson are charged with conspiring to hack phones between 3 October 2000 and 9 August 2006, along with former News International chief executive Rebekah Brooks.
Brooks also faces two counts of conspiring with others to commit misconduct in public office – one between 1 January 2004 and 31 January 2012, and the other between 9 February 2006 and 16 October 2008 – linked to alleged inappropriate payments to public officials.
She also faces two allegations of conspiracy to pervert the course of justice – one with her former personal assistant Cheryl Carter, 49, of Chelmsford, Essex, between 6-9 July 2011, and a second with her husband Charles Brooks, and former News International head of security Mark Hanna and others between 15 July and 19 July 2011.
Coulson is also facing two allegations that he conspired with former NotW royal editor Clive Goodman, 56, from Addlestone in Surrey, and other unknown people to commit misconduct in public office – between 31 August 2002 and 31 January 2003, and between 31 January and 3 June 2005.
Jurors were told that news editor Ian Edmondson , who is charged with conspiring to hack phones between 3 October 2000 and 9 August 2006, is "currently unfit" and will take no further part in the trial.
He will be tried by a different jury at a later date, Mr Justice Saunders said.
All of the defendants deny all of the charges.
The case continues.