A routine software upgrade of desktop PCs at the Department of Work and Pensions has left 80% of the ministry's computers unable to send or receive e-mails.
A memo sent to jobcentres yesterday stated, "At this point there is no known solution. We are hopeful that some interim measures that are being considered may release some users from their current deadlock."
Staff were warned it could take another 24 to 48 hours to resolve the problem completely.
As a result of the failure, some cheques had to be issued by hand and the department admitted there were delays in some payments.
Alexis Cleveland, chief executive of the pensions service, said the problem had been caused by an upgrade. She told Radio 4's Today programme that the benefits system worked "perfectly well".
"I am not saying that nobody has been affected by this. What I am saying is that we have got business continuity plans that we brought into play to try to minimise the impact on customers."
Cleveland also said that the benefits systems were not affected but admitted, "The difficulty has been accessing those systems from the network of computers on people's desks."
She added, "20% of the systems were working and staff were able to access those systems and we were able to prioritise our work so that where payments were necessary it was directed through the systems that were working."
The affected systems are operated by outsourcer EDS and Microsoft.
A Microsoft spokesperson said, "We’ve worked closely with our partners to help rectify the situation and to support the DWP." The spokesperson added that the situation had been resolved.
The DWP spent £412.5m on consultancy fees in the last financial year for external management and technical support, including consultants, advisers, accounts and lawyers. Outsourcing company EDS is also responsible for the Child Support Agency's £500m computer system.