How are fostering agency allowance rates set?

Fostering agency allowance rates are set through a financial and operational assessment of what a child’s care is expected to cost, the requirements attached to the placement and the agency’s approved payment framework. The agency must balance the child’s needs with fair, consistent payments to foster carers and the funding available through its commissioning arrangements.

The process normally considers several sources of information:

• Regulatory requirements: the agency must work within the fostering regulations, standards and applicable minimum allowance requirements for its nation of the UK.
• Typical household costs: the calculation may account for food, clothing, personal items, transport, activities, utilities and other costs associated with looking after a child.
• Placement information: the child’s age, circumstances, routines, health needs, education arrangements and contact commitments can affect the resources needed to provide care.
• Local and contractual arrangements: agencies may receive funding through agreements with local authorities or other commissioning bodies. Those agreements can influence the amount available for different types of placement.
• Agency payment structure: the agency decides how its allowance, any fostering fee and additional payments are organised, subject to the relevant rules and the terms set out in its policy.

It is important to distinguish between a maintenance allowance and a fostering fee. The allowance is intended to contribute towards the costs of caring for the child. A fee, where offered, is separate and recognises the foster carer’s time, skills and responsibilities. Some agencies present these elements separately, while others explain the overall payment using a combined figure. Asking how the figure is divided gives a clearer understanding of what the payment is designed to cover.

Agencies may use different rate bands or categories rather than one amount for every placement. For example, a framework might distinguish between a standard placement and one requiring more intensive care, specialist skills or additional arrangements. A higher rate should therefore be linked to defined responsibilities and eligibility criteria, not treated as an automatic payment for every child with a particular characteristic.

Before a placement is agreed, the agency should identify the proposed payment and explain any conditions attached to it. The information should make clear whether the amount is:

• the regular allowance, a fee, or a combination of both;
• calculated per child, per placement or using another method;
• different during introductory, respite or emergency arrangements;
• intended to cover particular expenses or paid alongside separate reimbursements;
• subject to evidence, prior approval or agreed spending limits; and
• affected by changes in the placement, such as a planned move, a change in care needs or an additional child joining the household.

Additional costs are often considered separately where they cannot reasonably be met from the ordinary allowance. These might include agreed travel, equipment, activities, specialist items or specific arrangements connected with the child. The agency’s policy should explain how such costs are requested, who authorises them and whether approval is needed before the expense is incurred. Foster carers should not assume that an exceptional cost will be reimbursed unless the arrangement has been confirmed.

Rates are usually approved through the agency’s internal governance process. This may involve senior managers, finance staff and fostering specialists reviewing the underlying cost assumptions, funding position and effect on placements. A responsible framework should also be applied consistently, so that carers can understand why a particular rate applies and when a different rate may be considered.

When comparing two agencies, compare the complete payment arrangements rather than a headline allowance alone. Check whether the quoted amount includes a fee, whether ordinary expenses are expected to come from it, how additional costs are handled and whether payments change for different placement types. Also ask whether training, equipment, travel and support are provided separately or are expected to be funded from the regular payment. This helps avoid comparing figures that cover different things.

A clear allowance policy should be available during the assessment and application process. If an explanation is only verbal, ask for the relevant written information and the proposed terms for any placement being considered. Useful questions include:

• What elements make up the total payment?
• Which costs are expected to be paid from the allowance?
• Are there separate arrangements for specialist, respite, emergency or sibling placements?
• How are one-off and exceptional expenses agreed?
• What happens if the child’s needs or the placement circumstances change?
• How will any alteration to the payment be communicated?

The amount offered should be considered alongside the quality of the agency’s assessment, training, supervision and practical support. A payment figure by itself does not show how well the arrangement will meet a child’s needs or whether the policy is sufficiently clear for a prospective foster carer to make an informed decision.