The learning disability charity Mencap might have to pay £20m in back pay for sleep-in care workers, which could lead to the closure of 200 residential care homes and services run by the charity and up to 4,000 staff being made redundant.
The warning comes after a row with government over back pay for sleep-in workers, who are used widely in the learning disability sector to provide care for vulnerable adults. Until recently workers were paid a flat-rate, "on-call" allowance rather than the national minimum wage.
Derek Lewis, chair of Mencap, said the government should provide funding for as much as £400m in back pay owed by social care charities to sleep-in care workers, and said that if it failed to do so it could force Mencap to transfer the care facilities it runs back to local authorities.
He also warned that, although the charity began paying sleep-in care staff the national living wage from 1 April, 40 per cent of local authority commissioners had not yet agreed to pay the new rate, a situation Lewis said was "not sustainable".
The flat rate for a sleep-in care worker is typically £35 to £45, with workers receiving either the national minimum wage or the national living wage for the hours they spend providing care, according to the Voluntary Organisations Disability Group, which represents charities that provide services to disabled people.
But in the wake of two employment tribunal decisions made last year, the Department for Business, Energy and Industrial Strategy has changed its guidance to ensure that the national minimum wage applies to sleep-in carers.
Earlier this year, HM Revenue & Customs began asking some disability charities to give six years of back pay to affected staff.
But the BEIS later said employers that had underpaid workers for sleep-in shifts before 26 July 2017 would have historical financial penalties waived and HMRC would suspend its enforcement activity about sleep-in care shifts until 2 October.
Lewis said that Mencap’s back-pay liability was approximately £20m, but the charity had only £19.6m in financial reserves.
"Funding back pay would require highly damaging actions to sell assets, cut programmes and cancel investment," he said. "Our plans to improve the lives of those with learning disabilities could be set back by a decade or more as we struggle to repair the financial damage that would be caused by this liability.
"If government fails to fund or offers only partial funding, Mencap would be forced to take emergency action to hand back care services that do not cover costs to local authorities.
"Initially, this could result in the termination of care in more than 200 residential care homes and services, affecting more than 2,000 people who have serious learning disabilities. Between 3,000 and 4,000 dedicated care workers could face displacement or redundancy."
Lewis has also criticised a Department of Health sample fact-gathering exercise on the extent of sleep-in care financial liabilities for being carried out "very late in the day", with HMRC action against the charities due to resume in 25 days’ time.
"No one expected government to sign a blank cheque, but the process was very late in the day and hurried," said Lewis.
"Scrambling to gather complex data in late August, when many people are away and tensions are running high, creates anxieties about the accuracy of information on which critical decisions will be taken.
"Concerns have been heightened by the government’s surprising refusal to share the results of this exercise with providers."
The Department of Health is understood to be working with the social care sector on the issue and is expected to make a further announcement in the next few weeks.
A petition calling on the government to pay the £400m back-pay bill had been signed by more than 10,000 people as of this morning.