CENTRAL government must fund millions owed to care workers in back-pay or care providers will go bust, the Local Government Association (LGA) warned yesterday.

Following two employment tribunals, new guidance was issued last October declaring that the previous flat rate “on call” allowance across the sector was wrong and the minimum wage should be paid for so-called sleep-in shifts.

Now the government has announced that social care providers — including children’s homes — will be given up to a year to identify what they owe to workers who were incorrectly paid less than the minimum wage for overnight shifts.

Employers will then have up to three months to pay workers under a new “compliance scheme.”

Charity Mencap has estimated that the bill for learning disability workers alone is around £400 million.

Unless the government helps with funding, a quarter of residential homes, residential children’s schools and respite services could be forced to close, the Independent Children’s Homes Association said after polling 63 of its members.

The LGA said previous government guidance was misleading and caused confusion over rates for sleep-in shifts.

Izzi Seccombe, chair of the LGA’s community wellbeing board, said: “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.”

Labour’s shadow health minister Julie Cooper said: “It is an outrage that care staff, who are some of the lowest paid in the country, may now have to wait until March 2019 to get the pay they have earned.

“It shows Theresa May’s pledge on becoming Prime Minister to help the lowest paid and those, like care staff, working round the clock to be utterly hollow.”