Care workers will lose their jobs and providers will go bust if the Government does not fund historic liabilities for paying staff on so-called "sleep-in shifts", local authorities have warned.
The Government announced on Wednesday that social care providers including children's homes will be given up to a year to identify what they owe workers who were incorrectly paid below the minimum wage for the overnight shifts.
Employers will then have up to three months to pay workers under a new "compliance scheme", ministers said.
The Government has already been warned that a number of children's homes could face closure due to a change in the interpretation of the law on pay for overnight carers.
The Local Government Association (LGA) said on Thursday that the announcement did not end the uncertainty for providers, care workers, the people they look after or those who pay for their own care.
Izzi Seccombe (pictured), who chairs the LGA's Community Wellbeing Board, said: "It was misleading government guidance in the past which caused the confusion over whether the national minimum/living wage should apply for sleep-in shifts. Now the Government has clarified the position, it needs to provide genuinely new funding to deal with back payment.
"Councils already face a £2.3 billion annual social care funding gap by 2020 and pressures across the sector - particularly on providers - are acute. If the Government does not fund the historic liability then we are likely to see more care providers going bust, more contracts being handed back to councils, and care workers being made unemployed.
"It is wrong to assume the spring Budget £2 billion for social care can cover this additional burden. The forthcoming Budget needs to inject new money into social care to meet this pressure."
The Independent Children's Homes Association said a poll of 63 of its members - which include residential homes, residential children's schools and short break or respite services - found a quarter believe their organisations could face closure if they do not get help with back pay for staff.
The payment of a flat-rate "on call" allowance has been the norm across the sector, but following two employment tribunals, guidance in October last year recognised that the previous guidance was wrong and the minimum wage should be paid.
Mencap had estimated that the back pay bill in the learning disability sector alone was estimated at about £400 million.
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