A pay equity bill could cripple the care sector with "potentially catastrophic" results if it's not properly funded, MPs have been warned.
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The legislation will finalise a $2 billion deal, announced last month, giving about 55,000 state-subsidised care and support workers a pay rise of between 15 and 49 per cent from July.
The government says providers will get additional funding on top of the $2bn to help offset any additional costs.
But service providers have told a parliamentary select committee that's not enough.
The Home and Community Healthcare Association estimates the deal would leave the sector about $250 million dollars out of pocket over the five years.
Association chair Andrea McLeod told MPs the legislation could have "potentially catastrophic" consequences for providers, clients and support workers themselves.
"We were promised that any settlement would be fully funded.
"It is not."
Aged Care Association chief executive, Simon Wallace said more than 150 of its members had come forward with similar worries.
He said they were already stretched to the limit.
"Their options are to cut back staff, to make staff redundant or to close.
"Residents will end up in communities away from their families and friends ... we don't want a return to ward-like rest homes of the past where we have four people in one room."
Mr Wallace said the cost would balloon as other staff - such as team leaders or nurses - requested pay rises too.
"Already there are nurses asking for more money. And in the interest of a happy and stable workforce, our employers will have to pay nurses more. They will have to find money to do that."
Care sector near breaking point - Geneva Healthcare
Ross Smith, from the Salvation Army, told MPs the sector was already severely underfunded and could not cope with any extra costs.
"This funding is teflon-coated. It comes in and it slides out again."
He also spoke on behalf of VisionWest Baptist Homecare which he said would face a bill of up to $1m because of accrued leave.
"This is serious money. This isn't a journal entry. This is not paper money. This is actual cash that we will have to find when our hard-working support workers take a well-earned break.
"And where is that funding going to come from? Because we sure as heck don't have that sitting in reserve."
Geneva Healthcare is the second largest provider of home and community support services in New Zealand.
Its executive director, Peter Wilberforce, told the committee the sector was near breaking point.
"What we're talking about is [the Ministry of Health] pushing the industry off a cliff and we don't know whether we're going to end up with a broken leg or a broken neck."
"The clients are going to not have choice ... you're going to lose specialist providers ... and it's actually going to cost you way more money down the track."
The legislation is due to be reported back to Parliament on Tuesday next week.