A quarter of independent children’s homes could close immediately if the government does not fully fund the £400m sleep-in care back-pay bill that is affecting care and learning disability charities, Mencap has warned.

The warning comes after a row with the 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.

After it had discussions with other organisations in the wider children and elderly care sectors, Mencap said that 25 per cent of independent children’s homes could be forced to close if HM Revenue & Customs was to start collecting up to six years of back-pay for sleep-in care workers.

Approximately three-quarters of children’s care services are run by independent providers, according to Mencap, and the charity is campaigning for the government to fully fund the back-pay bill to prevent the sector collapsing.

The sleep-in care crisis comes after two employment tribunal decisions made last year forced the Department for Business, Energy and Industrial Strategy to change its guidance to ensure that the national minimum wage applied to sleep-in carers.

Before this, sleep-in care workers were typically paid a flat rate of £35 to £45, with workers receiving either the national minimum wage or the national living wage for the hours they spent providing care, according to the Voluntary Organisations Disability Group, which represents charities that provide services to disabled people.

Latest headlines

Earlier this year, HMRC began asking some disability charities to give six years of back pay to affected staff, which Mencap estimated could cost the learning disability care sector £400m, and Mencap itself £20m.

HMRC’s enforcement action has twice been suspended, but is due to begin again from 2 November. The government is due to announce what action it will take before the end of the month.

Mencap chairman Derek Lewis said: “The government has created a perfect storm for providers from across the care sector.

“I urge government to recognise its responsibilities and commit to funding all ‘sleep-in’ back-payment liabilities. Assuming, as has been suggested by some, that providers can ‘trade through’ the crisis that is about to engulf children’s and learning disability care would be a catastrophic mistake.

“As government looks set to impose a new compliance regime for providers, it might spare a thought for the people – young and old – whose lives depend on the future of high-quality, independently provided social care. Once it’s gone, it’s gone.”