Families in Southend who stepped in to look after children won a share of £200,000 after it was ruled they had been underpaid for years.
An ombudsmen ruling in 2019 found 46 families with special guardianship orders had been short changed over two years ahead of becoming full time guardians.
They had been paid interim payments but should have received the same money as foster carers.
Southend Council, which had paid only a percentage of what foster carers would receive in those two years, had to make payments backdated over eight years after the successful tribunal was launched by one family.
A new policy has now been agreed by the council with an additional £50,000 set aside for future payments.
At a people scrutiny committee meeting on Tuesday, Laurie Burton, councillor responsible for children and learning responded to a question from Chalkwell ward councillor James Courtney on how the council had got into the “disappointing” situation.
Mr Burton said: “Special guardianship orders are another way the children can be cared. Its outside local authority control. You might get a child’s parent who had died and being looked after by a grandmother.
“Previously people who had special guardianship orders were not treated the same as foster carers. They don’t get the foster carers allowance. We were taken to tribunal by someone who had a special guardianship order who was arguing that was discriminatory because they were not getting the same allowance as foster carers. The tribunal found against us so this is where the new policy has come from.”
John Lamb, Conservative councillor for West Leigh, said he was concerned families, some who have been bereaved and found themselves in difficult circumstances, had had their difficulties made worse by the underpayments.
He said: “These are special guardianships and therefore if they’ve had hardship during that period because they haven’t had the full allowance they should have been entitled to are we recompensing in making additional payments to overcome any hardship that suffered.
“If we don’t look at that we could have made these families suffer additional hardship that they wouldn’t have done if they had originally got the full payment. Surely we have a duty to make sure we’ve identified anyone who has suffered additional hardship and that we will in fact cover that to help them come back onto the norm.”