Thirty-three staff employed by the Galilee Foster Care and InTouch programs will be affected by the agency's decision, which shifts the two services from Communities@Work to Marymead and Barnado's.

A total of 18 permanent and 15 casual employees are facing redundancy, redeployment within Communities@Work, or a job with the two incoming services.

One employee, who preferred not to be named, said despite the six weeks' notice, the announcement was a ''huge shock'', and he had concerns some staff may not have the qualifications for employment among the agencies.

''It's all just up in the air at the moment,'' he said.

''We don't know where we stand. It's all smoke and mirrors.''

A spokesman for Communities@Work said management was working closely with the staff following the strategic decision to withdraw from out-of-home care amid structural changes in the sector.

''We concluded that the size of our operation did not give us the economies of scale for ongoing viability and sustainability,'' he said.

The transfer of services will begin this week and is expected to be finalised by December 6.

''Carers will be given their choice of agency,'' he said.

''There will be minimal disruption for carers, families and children, who will be supported throughout the entire process.''

The changes will not affect the $1.625 million ACT government funding allocated to out-of-home care services throughout 2013-14, a Community Services Directorate spokesman said.

''The funding associated with this provision of service will move to the agencies that agree to provide the support to the carers and families,'' he said.

There is increasing demand for services, with an almost 50 per cent increase in the number of children in care over previous years.

The number of children in out-of-home care in Canberra increased by 49 per cent over the past six years, according to child protection reports issued by the Australian Institute of Health and Welfare.

A total of 566 children were in out-of-home care as of June last year, up from 399 in 2007.

The number of homes hosting foster children in Canberra also increased, up 32 per cent to 154 homes in June 2012, while a total of 249 homes had a foster placement throughout 2011-12.

Emma Robertson from Youth Coalition of the ACT said it was encouraging that the number of foster carers in the capital was rising but further recruitment was needed.

''The number of children going into out-of-home care is also increasing,'' she said.

Ms Robertson said the coalition had been in discussions with Communities@Work, and backed its decision to offload the foster care service, as long as carers and clients remain supported. ''They're trying to target services where they're best placed,'' she said. ''I think it's a good thing that people aren't trying to do a little bit of everything not as well as it should be done.''