The job includes advising the Prime Minister, directing the implementation of government policy and managing other senior officials.
Speaking to BBC Radio 4’s The Westminster Hour, Lord O’Donnell described the role as a “huge job”.
He said: “It is massively underpaid in my opinion as I have since been paid a lot more, to do a lot less.”
Lord O’Donnell was Cabinet Secretary under three Prime Ministers. He was promoted to the post under Tony Blair in 2005, and he continued in the role of Gordon Brown’s premiership between 2007 and 2010.
He resigned in 2011 under the David Cameron-led coalition government.
Recruitment efforts are underway to replace the current cabinet secretary, Simon Case, who has said he will step down by the end of the year.
In announcing his resignation, Case said he had been undergoing medical treatment for a “neurological condition” for the past 18 months.
He emphasized that his dismissal “is solely related to health and has nothing to do with anything else.”
Lord O’Donnell said whoever replaces Case must have a “good relationship” with the Prime Minister’s chief of staff, Sue Gray.
“Sue knows the civil service backwards,” he said. “That should be one of the easiest parts of the job, I would say.”
Ms Gray, previously a senior civil servant herself, was at the center of a row over her own pay in September after the BBC revealed she is paid £170,000 a year.
This is more than the Prime Minister, who earns £166,786.