A number of children's homes fear they could face closure due to a change in the interpretation of the law on pay for overnight carers, ministers have been warned.
The Independent Children's Homes Association said a poll of 63 of its members - which include residential homes, residential children's schools, short break or respite services - found a quarter believe their organisations could face closure if they do not get help with back pay bills for staff which have come as a result of the change.
The Association has joined forces with learning disability charity Mencap to highlight its concerns.
Since 1999, care homes operated under advice that time spent asleep by care staff in residential homes and supported living residences did not count as work time for the purposes of the National Minimum Wage (NMW), Mencap said.
The payment of a flat-rate ''on call'' allowance had been the norm across the sector ever since, it said.
But following two employment tribunals, new guidance in October last year recognised that the previous guidance was wrong and the NMW should be paid for sleep time instead.
The back pay bill for sleep in the learning disability sector alone is estimated to be around £400 million, the charity said.
It has warned that many homes could face insolvency.
Mencap chairman Derek Lewis said: "We already knew that the impact on learning disability care would be devastating but it is only now emerging that many of the country's 2,000 specialist children's homes would also be seriously affected.
"It is estimated that up to 25% could close almost immediately if the Government fails to fully fund or only partially funds the sector's sleep-in back pay bill.
"Like our own, these services would be some of the hardest to replace and once they are gone, they are gone.
"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-ins' back payment liabilities."
Jonathan Stanley, chief executive of the Independent Children's Homes Association, added: "Sleep-in back payments, which will range from £40K to over £2 million for each provider, depending on the size of the provider and number of homes they run, will be the final nail in the coffin for so many who have faced a zero increase in fees from local authorities, the only purchaser and income source, over a number of years.
"Without urgent Government assistance, the residential child care sector faces profound change and one of the most important care options for vulnerable children will be lost forever."
In July the Government announced that it would waive historic financial penalties owed by employers who underpaid their workers for overnight sleep-in shifts before July 26 this year and temporarily suspend HMRC enforcement activity concerning payment of sleep-in shifts by social care providers until October 2.
But Mencap said neither move addressed the impact of the back pay bill across the sector.
On September 28 the Government announced that enforcement action was suspended for a further month.
A number of celebrities have backed Mencap's campaign, including Game Of Thrones star Kit Harington and Doctor Who's Jodie Whittaker.
Copyright (c) Press Association Ltd. 2017, All Rights Reserved.