Financial Conduct Authority guidance: The manager capability risk

FCA guidance: Workplace misconduct

The Financial Conduct Authority’s (FCA) updated guidance on non-financial misconduct may only apply to regulated firms, but it highlights a challenge facing employers across every sector.

The guidance provides greater clarity on how concerns such as bullying, harassment and violence should be identified, assessed and escalated where there is a sufficient work-related link. While this is a regulatory change for financial services, it reflects a wider shift in employer expectations.

Managers are increasingly expected to make fair, consistent and well-evidenced people decisions across conduct, performance, absence, probation and workplace culture, often in situations where the consequences of getting those decisions wrong are becoming more significant.

This article looks at what is changing under the FCA guidance, why people risk is rising across every sector, and how HR can strengthen manager decision-making before issues escalate.

What’s changing: FCA guidance

From 1 September 2026, regulated firms will need a clearer approach to serious non-financial misconduct under updated FCA guidance, including how concerns around bullying, harassment and violence are identified, escalated and evidenced where there is a sufficient work-related link.

The FCA has also provided greater clarity on how non-financial misconduct should be considered under conduct rules and fitness and propriety assessments.

In practice, firms may need to review:

• Policies and conduct procedures
• Escalation and reporting routes
• Conduct breach reporting requirements
• Evidence and record-keeping expectations
• Manager responsibilities for handling concerns.

For many organisations, the challenge will not stop at updating policies. The bigger question is whether managers are equipped to apply them consistently when real workplace issues arise, particularly as the environment they are operating in becomes more complex.

Why every employer should pay attention

Although the FCA guidance applies to financial services, the underlying challenge will be familiar to HR leaders in every sector.

Managers are being asked to make increasingly complex people decisions, from conduct and grievances to probation, performance and organisational change, at a time when Employment Rights Act changes, rising tribunal activity, easier access to AI tools and greater scrutiny of workplace behaviour are all increasing the consequences of getting those decisions wrong.

The real test is whether managers have the confidence, judgement and support to apply them properly when the facts are messy, the conversation is uncomfortable and the evidence trail needs to stand up to scrutiny.

That’s why manager capability needs to be treated as a practical risk control, not a training tick-box. When managers know how to act early, document decisions consistently and escalate at the right time, fewer issues become formal cases, decision-making becomes more consistent and HR gains better visibility of what is really driving employee relations risk.

Why people risk is increasing

Managers are making people decisions in a very different environment than they were just a few years ago. Several trends are increasing the risk attached to everyday employee relations decisions:

• Employment Rights Act changes are increasing the need for managers to apply policies consistently and document decisions carefully, particularly around probation, performance, flexible working and family-related rights.
• Employment Tribunal claims are rising, with Ministry of Justice statistics showing single-claim receipts increased by more than 50% year-on-year, while open caseloads continue to grow.
• Redundancy intentions are increasing, with CIPD research reporting the highest levels seen outside the pandemic in the last ten years.
• AI-assisted complaints and grievances mean employees can now draft more detailed and structured challenges to employer decisions with minimal effort.

The question for HR is whether managers have the confidence, guidance and support to make the right decisions consistently without relying on HR at every stage.

Manager decisions create the biggest risk

Changes to legislation and regulation often prompt organisations to review policies, procedures and documentation. Those changes are important, but they do not determine outcomes. The outcome of an employee relations issue is often shaped by:

• How a manager responds when a concern is raised
• What action is taken and when
• What evidence is recorded
• Whether the issue is escalated appropriately.

This is challenging for accidental managers who may be strong operational performers but have limited experience handling employee relations issues, assessing evidence or navigating difficult conversations.

The cost of unsupported managers

The impact is usually seen in the employee relations cases HR teams are left to manage, including:

• Minor issues become formal disputes because early conversations are delayed, avoided or handled inconsistently.
• Probation and performance decisions become harder to defend because concerns were not documented clearly at the time.
• Conduct issues become wider culture risks because poor behaviour is not challenged or escalated appropriately.
• HR loses visibility of emerging trends because issues are managed locally until they become too complex to contain.
• Regulated employers face additional exposure where workplace behaviour concerns overlap with conduct and compliance obligations.

If any of these challenges sound familiar, it may be time to review whether your current employee relations model gives managers enough support at the point decisions are made.

What a stronger ER model looks like

A stronger ER operating model gives managers the support they need to make better decisions, while helping HR spot issues earlier and understand where employee relations risk is building.

That means routine issues can be handled earlier through guided self-service, while more sensitive or complex cases are escalated for expert support before they drift.

It also helps HR identify the causes behind employee relations activity, whether that is poor manager confidence, policy confusion, recurring conduct issues, absence hotspots, probation challenges or inconsistency in how policies are being applied.

That matters because HR cannot intervene early if it only becomes aware of an issue after it has already become formal, complex or contentious.

How AdviserPlus helps reduce ER risk

As employee relations specialists, AdviserPlus helps employers build the structure managers need to make better people decisions while giving HR greater oversight of risk across the organisation.

The focus is on practical support, including:

• Guided self-service that helps managers resolve straightforward issues earlier and more consistently.
• Expert employee relations support for complex or high-risk cases.
• Better visibility of the root causes driving case volume and workplace risk.
• Earlier intervention to prevent avoidable issues becoming formal disputes.
• Data-driven decision-making that strengthens outcomes and improves defensibility.

For HR teams, this creates a shift from reacting to cases after they escalate to identifying and addressing issues earlier, improving consistency while providing greater visibility of the factors driving employee relations activity.

Review your manager support model

The FCA guidance is a timely reminder for every sector.

Employment Rights Act changes, rising tribunal activity, organisational change and AI-assisted complaints are all increasing the demands placed on managers.

Organisations that invest in manager capability now are more likely to reduce escalation, improve consistency and identify issues earlier, before they become costly employee relations problems.

Policies don’t manage risk, managers do.