The Government has announced a one-month suspension of minimum wage enforcement for sleep-in shifts in the social care sector while it establishes if the industry needs more financial support.
Organisations including charities had been given until October 2 to agree back pay following an employment tribunal decision that workers should be paid the minimum wage for a sleep-in shift rather than a flat rate allowance.
Charities have warned that the sector could be badly affected and could lead to some ending their involvement in providing services.
The Government said Thursday's announcement will allow it to establish how providers' back pay bills will affect vulnerable people's care.
A statement by the Business Department said: "During this temporary pause, the Government will develop a new enforcement scheme for the sector to encourage and support social care providers to identify back pay owed to their staff.
"This will help to minimise the impact of future minimum wage enforcement in the sector while seeking to ensure workers receive the arrears they are owed.
"It remains the Government's expectations that all employers pay their workers according to the law, including for sleep-in shifts."
A Government spokesman said: "We recognise the vital role social care providers play in supporting some of the most vulnerable people in our society and equally that social workers should be paid fairly for the important work they do.
"This suspension will help to minimise disruption to the sector as we seek to ensure workers receive the wages they are owed while we establish whether the industry needs any further support."
Unison general secretary Dave Prentis said: "Penalties are needed to make sure unscrupulous bosses abide by the law but this extended amnesty is a green light for dodgy employers to carry on paying illegal wages without fear of ever being punished.
"In the absence of fines or the public shaming of any firm found guilty of poverty pay, the UK's minimum wage law is being seriously undermined.
"While there may be some sympathy for charities who owe their sleep-in staff money for not paying the minimum wage when they should have been, many care providers are private equity-backed companies that can well afford to pay up.
"By suspending enforcement, we have grave concerns ministers may well have been acting unlawfully and using powers they don't have."
Sharon Wilde, GMB national officer, said: "This disgraceful announcement shows that the Government is washing its hands of a care sector in crisis.
"Care workers perform extremely difficult jobs for very low pay and ministers are treating with contempt by not enforcing the national minimum wage.
"The average care worker earns just £7.75 an hour - just 25p above the minimum wage - and non-compliance with the law is still endemic in the sector."
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