Premier Youthworks staff were told on Thursday the company would stop providing services in the ACT as of August 14. All 125 staff positions would be made redundant. NSW operations would not be affected.

Premier Youthworks is one of four service providers that make up the consortium ACT Together, which provides out-of-home-care services for children and young people in Canberra.

Children and teenagers wind-up in Premier's residential care homes when they are unable to live with their families, often because they are at risk of abuse or neglect.

The consortium leases 17 homes across the territory and provides the staff to care for about 32 children in the last-resort option for out-of-home care. There are 12 homes leased to Barnardos.

However, five homes are privately leased by Premier Youthworks, leaving the children in those houses in limbo. ACT Together will work with the owners of those homes with the aim of continuing to rent them so the children and young people have a stable home.

Barnardos was told on July 5 that Premier Youthworks planned to pull out of its service offering.

Premier Youthworks staff left the Thursday meeting distressed. The Canberra Times understands the staff were told to tell the children in residential facilities of the company's plans, without any further detail about what it meant for the young people or their carers.

In a letter to staff obtained by The Canberra Times, the company said the funding it received was not enough to cover the costs of operation.

The letter outlined "several factors that have placed enormous financial pressure on Premier Youthworks and ultimately brought us to the situation that we now face".

One of the reasons outlined was the high cost of workers compensation claims.

"Premier Youthworks do everything in our power to support staff, however, the impact of managing the associated high-risk incidents often leads to workers' compensation claims. In the ACT alone, the cost to Premier Youthworks for workers compensation insurance has risen by over 400 per cent in the space of two years," the letter read.

Director Lisa Glen said in a statement the funding arrangement had been the reason behind the decision.

"There have been many discussions and meetings over the last 12 months, involving Barnardos and Community Services Directorate, where requests for additional funds have been made to meet the costs of delivering services to the most vulnerable children and young people in the community," Ms Glen said.

"Unfortunately these repeated attempts to gain additional funding to offset the costs of delivering services in the ACT have been unsuccessful."

She said the company had done everything in its power to remain sustainable and still provide high quality services, but it had reached the point where that was no longer possible.

An ACT government spokeswoman said it does not stipulate the funding or other arrangements for Premier Youth Works and other sub-contracted organisations within the consortium.

"The ACT government pays Barnardos a flat fee per placement in out of home care," the spokeswoman said.

"This flat fee was increased from January 2019 following a mid-contract review."

The spokeswoman said Barnardos had assured the Community Services Directorate that as the consortium leader it would ensure continuity of support for the children and young people in residential care.

"In the medium term, another organisation will join the ACT Together consortium. In the meantime, Barnardos and the Community Services Directorate are working together to ensure young people are supported during the transition and their placement arrangements are stable," the spokeswoman said.

Minister for Children, Youth and Families Rachel Stephen-Smith said the safety, care and stability of arrangements for the affected children and young people was the ACT government's highest priority.

"Our strong preference is that young people in residential care continue to be supported by staff they already know," the minister said.

"I have met a number of these staff and have always been impressed by their professionalism and commitment to supporting some of the most complex and vulnerable children and young people in our community."

"We are also very conscious of the impact of this announcement on Premier Youthworks' staff and I wish to reassure them that every effort will be made to retain current staff within the ACT Together consortium, should they wish to make this transition, so they can continue their trusted work with young people."

Barnardos executive manager out-of-home care NSW/ACT Elizabeth Cox said the consortium was committed to providing stability for those affected.

"The children and young people are why we're all here," Ms Cox said.

She said the consortium was working on how to manage the transition of services, but it hoped to transfer the lease of homes from Premier to ACT Together, and to retain at least some staff.

"Those children will remain stable in their houses, they have homes that they are living in together and it is our utmost commitment for those children to remain there," she said.

"We have no desire or intention to do anything that would affect their stability.

"The changes they might expect is that they will probably get a new case manager, but we will work with them in that process... As much as possible we will be looking to the continuity so we would imagine a situation where many of the same staff continue to work with those children."

However, she said, the retention of staff by ACT Together was "an ongoing piece of discussion".

Ms Cox said there were a number of staff who were "highly distressed" following the announcement. ACT Together had employee assistance at the site to help workers.

In 2017, Premier Youthworks came under fire for the state of housing in which the ACT's children and young people were living.

Some children were found living in a squalid care home with broken walls, blood on the door and smashed glass in the kitchen. The property was run by Premier Youthworks.

Concerns about the state of the home were uncovered in a joint investigation by The Canberra Times and The Newcastle Herald.