On 21 May 2026, HMRC updated paragraph EIM31240 of its Employment Income Manual to reflect a newly announced increase in the statutory mileage allowances for cars and vans for the 2026-27 tax year onwards.

The revised rates, backdated to 6 April 2026, are as follows:

55p a mile for the first 10,000 miles (an increase of 10p from the previous rate).
25p a mile for additional miles (unchanged).

Employers should ensure they now reimburse their employees to reflect the revised rates. Consideration should also be given as to whether an uplift to payments already made for April and May 2026 to reflect the backdated increase, is required.

Employers that have been reimbursing their employees above the previous rates may need to revise their payroll calculations for April and May 2026 given the retrospective nature of the increase and employees who have been (or will be) reimbursed less than the revised rates may wish to consider claiming relief for the difference from HMRC.

A written ministerial statement made on 21 May 2026 confirms that the government will legislate retrospectively in respect of this change at the earliest opportunity.

If you need an updated expenses policy to deal with this change, then please contact Gemma Durham at [email protected]

The decision in McMahon v AXA ICAS Ltd is one of the most significant recent UK employment law cases concerning permanent health insurance (PHI) benefits, unlawful deductions from wages, and the limits on an employer’s ability to dismiss employees on long-term sick leave.

This case progressed through the Employment Tribunal, the Employment Appeal Tribunal (EAT), and ultimately the Inner House of the Court of Session in Scotland.

Whilst a decision of the Scottish Courts, the case highlights the legal risks that arise when employers operate PHI or income protection schemes without fully considering the contractual obligations attached to them.

Background

AXA ICAS Ltd employed Carol McMahon from 2000 until her dismissal in 2013. Her contract included entitlement to a PHI scheme providing 75% of salary during long-term incapacity, with annual increases until recovery or retirement age. Ms McMahon became unable to work due to illness in 2010 and later became eligible for PHI benefits.

However, her employer, AXA ICAS Ltd had failed to secure the insurance policy intended to fund those benefits.

Ms McMahon argued that:

she remained contractually entitled to PHI payments;
there was an implied contractual term preventing dismissal where dismissal would deprive her of PHI benefits; and
non-payment of those benefits constituted an ongoing unlawful deduction from wages under the Employment Rights Act 1996 (ERA).

Earlier tribunal decisions rejected the argument that post-dismissal PHI payments could amount to “wages,” but the Court of Session ultimately disagreed.

The Court of Session’s Ruling

1. Whether PHI Benefits Constitute “Wages”

The central legal issue concerned sections 13 and 27 of the Employment Rights Act 1996, particularly the definition of “wages.”

Section 27 ERA defines wages broadly to include sums payable “in connection with employment.” The question before the court was whether PHI benefits payable after dismissal could still fall within that definition.

The Court of Session held that PHI benefits were capable of qualifying as wages even after termination because:

the entitlement arose from the employment contract;
the scheme was specifically intended to operate when the employee was incapable of working; and
the employer could not rely on dismissal to extinguish rights the scheme was designed to protect.

This was a significant development because unlawful deduction claims in the Employment Tribunal are uncapped, whereas a breach of contract claim in the Employment Tribunal is subject to a cap of £25,000 of damages.

2. The Implied Term Restricting Dismissal

The court accepted that there may be an implied contractual term preventing an employer from dismissing an employee for incapacity where the effect would be to deprive them of PHI benefits.

The reasoning included the finding that:-

the PHI scheme existed specifically to protect employees who became unable to work;
allowing dismissal solely because of incapacity would undermine the purpose of the scheme; and
employers should not benefit from their own wrongdoing by terminating employment to avoid liability.

This implied term has potentially wide implications for employers managing long-term sickness absence.

3. Post-Termination Liability

Another important issue was whether liability for PHI benefits could survive termination of employment.

The employer argued that any post-dismissal losses should only be recoverable as damages for breach of contract. That distinction mattered because breach of contract claims in the Employment Tribunal are subject to a £25,000 cap.

The Court of Session rejected this narrow approach and concluded that the obligation to make PHI payments could continue beyond dismissal where the dismissal itself breached the implied contractual protection.

As a result, Ms McMahon was allowed to pursue ongoing unlawful deduction claims potentially extending over many years, and in excess of £25,000.

4. Administrative Failures and Employer Responsibility

A striking feature of the case was that the employer had apparently failed to secure the insurance policy intended to fund the benefit scheme. The contractual entitlement nevertheless remained enforceable against the employer itself.

The case therefore demonstrates that:

insurance arrangements do not necessarily limit employer liability;
employers remain contractually responsible for benefits promised to employees; and
failures in scheme administration can create substantial direct financial exposure.

So what does this decision mean for employers, and what are the Key Takeaways?

For employees, the case strengthens their protections when on long-term sick leave.

For employers, it creates increased litigation risk where PHI or income protection schemes are poorly drafted, inconsistently administered, or disconnected from sickness dismissal procedures.

Employers should therefore:-

urgently review employment contracts, staff handbooks, PHI policy wording and insurance arrangements. Any mismatch between contractual promises and insurance cover may expose the employer to direct liability.
exercise extreme caution before dismissing employees on long-term sick leave – dismissal for incapacity may breach an implied contractual term if the employee has entitlement to PHI benefits.
ensure insurance policies are actually in place, as one of the most damaging facts in the case was the alleged failure to secure the insurance cover at all. HR and legal teams should therefore check policy renewal dates and employee eligibility for insurance policy cover.
Be alive to the fact that liability may continue after termination of the employment relationship, as this decision suggests that PHI-related liabilities may survive dismissal and continue for years. This significantly increases the financial exposure of sickness management decisions, particularly for senior or long-serving employees.
align sickness absence procedures with contractual benefits – this will likely require a policy audit to ensure contractual benefits are considered as part of capability procedures, and training where necessary to ensure managers understand PHI implications.

It is also highly advisable that you seek legal advice before taking the decision to dismiss an employee in these circumstances.

The recent Employment Appeal Tribunal (EAT) decision in Tarbuc v Martello Piling Ltd is an important warning for employers who rely on protected conversations under section 111A of the Employment Rights Act 1996 (ERA). While s.111A allows employers to hold confidential pre-termination discussions, it is important that employers are aware that the protection is narrow and can be used only in limited circumstances. The case has highlighted the conditions of s.111A protection and confirms that tribunals must assess ‘improper behaviour’ holistically, not just by looking at specifically what was said in the meeting.

Employers are reminded that labelling a meeting as a ‘protected conversation’ does not guarantee confidentiality, and procedural missteps around notice and accompaniment can unravel an employer’s protection under this provision, and mean that anything said during that meeting (often where employers feel safe to talk openly and frankly) becomes admissible in any subsequent proceedings.

Background

Mr Tarbuc worked for Martello Piling Ltd from 2018 until his redundancy dismissal in June 2024. Prior to the dismissal, the Managing Director held a ‘protected conversation; meeting with him to discuss a redundancy proposal, pointing out issues with his performance and presented ‘heads of terms’ for a potential settlement. Mr Tarbuc complained that:

the meeting was sprung on him without notice,
he was not given the opportunity to bring a companion,
he was told that he would be made redundant if he did not accept the offer, and
he was given only five days to consider the proposal

he brought claims for unfair dismissal, unauthorised deduction from wages and less favourable treatment as a part-time worker. The employer sought to exclude all evidence of the meeting under s.111A ERA, which protects pre-termination negotiations in ordinary unfair dismissal claims.

The Tribunal’s initial approach

The Employment Tribunal (ET) accepted that the meeting was a protected conversation and found no improper behaviour. The ET therefore ordered that all references to the meeting be excluded from all claims. Mr Tarbuc appeal to the Employment Appeal Tribunal (EAT).

The EAT

The EAT found that s.111A only applies to ordinary unfair dismissal claims and the ET had wrongly excluded evidence from all claims despite s.111A not applying to wage claims, part-time worker detriment, discrimination or whistleblowing claims. It only applies to ordinary unfair dismissal. On this basis, the EAT required the case to be remitted.

In addition, it found that the ET had focused solely on what had been said in the meeting and failed to consider the lack of notice, the ‘ambush’ nature of the meeting and the lack of opportunity to bring a companion. The EAT held that improper behaviour must be assessed holistically and all factors must be considered when assessing improper behaviour under s.111A.

The EAT referred to previous rulings where an ambush meeting did not amount to improper behaviour but only because the ET had carefully considered all relevant circumstances in those cases. It was held that this level of analysis was missing in the ET’s evaluation of whether there had been improper conduct in Tarbuc v Martello Piling Ltd. The EAT also noted that Mr. Tarbuc had rejected the offer outright in the meeting, meaning the five-day period in the letter did not add pressure and was rendered irrelevant. The EAT also took the opportunity to clarify that the ACAS 10-day recommendation applies to formal written settlement agreements but not to preliminary ‘heads of terms’.

Why this matters for employers

This case reinforces several important principles: firstly that protected conversations are not a blanket shield and they only protect ordinary dismissal claims. S.111A cannot provide protection in relation to any other claims. It is therefore very important that employers consider the wider circumstances of the employee, and whether there is scope for the employee to bring claims beyond ordinary unfair dismissal, before proceeding with a ‘protected conversation’. Even if a conversation is protected for the purpose of an unfair dismissal claim, it can still be fully admissible if an employee brings a claim for discrimination, whistleblowing, or wage claims.

Further, it is a reminder to employers that ‘improper behaviour’ is a broad concept, it includes not just what is said at the meeting but how it is arranged and conducted. Meetings that could be interpreted as an ‘ambush’ are not automatically improper, but there is increased risk that in these circumstances s.111A protection will be lost.

Practical Guidance

Tarbuc is a reminder that protected conversations are a useful tool, but only when handled carefully. Employers should ensure that meetings are planned with reasonableness notice, employees are treated fairly, managers understand the limits of s.111A and the process is accurately documented.

If you require further guidance on protected conversations, our Employment Team can offer tailored advice to ensure that protected conversations are legally compliant and do benefit from the protection under s111A.

The landscape of politics in this country is as unpredictable as it’s ever been, with growing doubts around the current PM’s longevity, questions are beginning to emerge about who could replace him.

One of the current frontrunners within Labour to replace the current PM is Greater Manchester Mayor Andy Burnham. Of course, there are several obstacles in the way for Burnham before potential leadership, namely, winning the Makerfield by-election and being selected as the leader of the country.

That said, it’s the job of a good lawyer to try and predict the future to a certain extent, so here’s our take on what his government may mean for the creative industries based on his track record in Manchester.

What’s Andy Burnham Actually Done for the Sector? 

For starters, his track record is consistently pro-creative sector and pro-culture, viewing it as a central component of economic infrastructure and a core growth sector alongside digital, AI, and life sciences. That’s no real surprise given that Manchester is the largest creative cluster outside London although that’s not down to the efforts of any one individual; we’ve been punching way above our weight for years before devolution.

That said, Burnham’s been a genuine champion for the sector who’s backed up rhetoric with actual funding commitments such as the £10.5m Screen Production Fund – an initiative not just to bring production into the region but also build a local supply chain to support them alongside training to ensure its development. 

From a wider perspective, the mayor has consistently promoted the City Region’s culture, nightlife and visitor economy as a central pillar of its prosperity as well as a key part of its identity.

It’d be easy to come up with a much longer list of individual proof points, but this isn’t intended to be a press release or campaign material. What we can say from inside the M60 is that Andy Burnham’s impact on the Creative Industries has been wholly viewed as positive.

What Might This Look Like on A National Level?  

Extrapolating (carefully) from Manchester to Westminster, likely positives of a Burnham Premiership could include a continuation of stronger regional creative policy with a continuing focus on devolution, development of creative clusters and more funding to support them. His previous comments around the need for more “active state” economic policy could lead to more skills funding and subsidised infrastructure alongside a continued commitment to skills reform aligned to growth sectors, and given the Creative Industries’ unique challenges in dealing with talent gaps it’s hard to see how this wouldn’t be welcomed.

Again, Greater Manchester’s creative renaissance isn’t a project for which any one figure is responsible, regardless of their commitment and visibility, but the Greater Manchester Creative Sector Plan was built upon the Labour Government’s own national commitments coming out of the recently-launched Industrial Strategy so it’s unlikely that his administration would look to choose a different direction of travel.

What he would need to get to grips with would be taking a firm stance on AI regulation and the difficult balance between respect for IP rights and encouraging new forms of creativity and innovation. Given that businesses in the sector are having to do the same, they’re unlikely to welcome any erosion of their value or that of their work in favour of providing a soft landing for developing tech at their expense. In what has been described as the “battle for the soul of our nation” that may not be the most immediate issue to resolve, but it is an existential one for some of the most important of his corporate constituents.

It’s also worth being realistic about the fact that Manchesterism may not be able to scale nationally. We have the advantage of relatively tight, centralised governance, a very visible creative cluster, and strong legacy institutions to support them. This may be watered down by Whitehall in favour of other priorities, of which there will be many.

Getting Off the Fence 

So, would the creative industries benefit from Burnham as PM? We think so, in no small part due to the already-recognised strategic importance of the sector to the UK economy and a combination of existing commitments and a clear, positive direction for the future. He may not be a transformational figure for the sector, but he is one with a longstanding commitment to its prosperity, even if rolling out the northern model across the UK will be no easy task.  

It’s also worth noting that he’ll have to address some of the negative policy choices which businesses of all kinds have had to reckon with since Labour came back into power, but even if a new national approach may seem like more of the same from the North’s perspective then that may be a pretty good start. 

While we can’t say with any certainty that an Andy Burnham government would be the answer businesses have been looking for, alongside most of the country, we’ll be watching closely as the political landscape develops over the coming months…