Care providers for people with learning disabilities are facing a £400m bill for back pay that could bankrupt the entire sector, the charity Royal Mencap Society has warned.
HMRC is pursuing providers for six years of wages after the government reversed its decision that “sleep-in support” – where carers are present overnight but rarely called upon – is exempt from minimum pay legislation.
It means all organisations – from Mencap at one end of the scale to family-led businesses at the other, which together provide sleep-in support care for 178,000 people with learning disabilities – are at risk of insolvency, the charity says.
Enforcement action to claim the money deemed to be owed was stayed in July after pleas from providers, but it is due to resume on 2 October.
Mencap says the sector will be thrown into chaos if that happens without a government commitment to cover the back-pay bill.
Derek Lewis, the charity’s chair, said: “There would be, for a substantial period of time, chaos in the sector and the people who would suffer are people with learning disabilities, their families who would be subjected to great stress and the staff who care for them, many of whom would become redundant.”
Sleep-in support allows people with learning disabilities to live in their own homes and communities. Recent research suggested that 99.7% of sleep-ins are spent asleep.
When the national minimum wage – since replaced by the “national living wage” for workers over 24 – was introduced in 1999, time spent asleep by care workers in such circumstances was exempted in government guidance.
Instead workers were paid a flat on-call allowance, only being paid the minimum wage if their services were required during night. But after two individuals won employment tribunals claiming they were entitled to the minimum wage for the entire night, the government changed its advice saying the legislation did apply to sleep-in support.
Such care is commissioned and paid for by local authorities but HMRC has gone after the providers for the back payments with councils unwilling to foot the bill.
Mencap, one of the largest providers of sleep-in care, says it faces a £20m bill for the past six years, which will exhaust its reserves of £19.6m.
“Funding back pay would require highly damaging actions to sell assets, cut programmes and cancel investment,” Lewis 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.”
He said most of the reserves come from donors who did not envisage their money being used for such a purpose and would likely be put off giving in the future.
Mencap’s chief executive, Jan Tregelles, described it as “the worst crisis in our 70 years” and warned that it was the NHS “already about to face one of its toughest winters, that will have to pick-up the pieces”.
Celebrities including Jodie Whittaker, Joanna Lumley and Kit Harrington have joined the charity’s campaign for the government to intervene.
Research suggests the cost to the sector could total £400m. Smaller providers that are not incorporated could even face having to make back payments out of their own pockets. Many are unwilling to speak openly for fear of drawing HMRC’s attention.
One chief executive of a medium-sized provider in the West Midlands, said the organisation employs 300 people, delivering 1,100 hours of support and 27 sleep-ins every day.
He estimates its back-pay liability to be £1.5m compared with reserves of £1.4m, which include two care homes. “We would have to stop trading straight away, our contracts with local authorities would be toxic,” he said.
A Department of Health spokesman referred the Guardian to a previous statement by the Department for Business, Energy and Industrial Strategy, which said the government has “worked closely with the sector in response to concerns”.
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