Financial Conduct Authority guidance: What it means for all employers

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.

FCA workplace misconduct 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 bigger question is whether managers are equipped to handle concerns consistently when workplace issues arise.

Rising workplace misconduct risk

Managers are increasingly expected to make fair, consistent and well-evidenced decisions across conduct, performance, absence, probation and workplace culture. Several trends are increasing the risk of 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
• New ‘all reasonable steps’ to prevent sexual harassment reforms are expected to come into force under the ERA in October
• 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
• AI-assisted complaints and grievances mean employees can now draft more detailed and structured challenges to employer decisions with minimal effort.

These developments increase the complexity and consequences of everyday people decisions, and are also raising expectations on employers to demonstrate that the right policies, training, manager support and oversight are in place to reduce risk.

Reducing risk starts with managers

The outcome of a workplace conduct issue is often determined by what happens when a concern is raised, how it is handled and whether the right action is taken at the right time. The question for HR is whether managers have the confidence, guidance and support to navigate these situations consistently and confidently.

Outcomes are 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 can be 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 impact on accidental managers

The impact is usually seen in employee relations case trends, 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.

A stronger employee relations model

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 conduct trends, policy gaps, capability challenges and emerging workplace risks before they become formal disputes.

When HR teams become aware of issues early, they can support managers, identify emerging risks and help prevent concerns escalating into formal disputes.

Reducing workplace misconduct risk

The FCA guidance serves as a useful reminder that employers across all sectors need clear policies, effective training, confident managers, access to expert support and visibility of emerging risks.

As part of the Empowering People Group we help employers strengthen every stage of workplace misconduct prevention and management, from setting clear expectations through to supporting managers when concerns arise. This includes:

• Employment law and policy expertise to help ensure policies, procedures and documents remain compliant
• eLearning and training solutions that build awareness, reinforce expected behaviours and support evolving employer obligations
• Guided manager self-service that helps managers handle routine people matters consistently and confidently
• Expert employee relations advisory support to guide managers through best-practice steps to manage misconduct cases
• Workforce insight and data visibility that help HR identify patterns, understand emerging risks and intervene before issues escalate.

These capabilities form a joined-up employee relations operating model delivered through a single trusted partner. For HR teams, this shifts the focus from reacting to misconduct issues to preventing avoidable escalation through stronger governance, greater manager capability and better visibility of risk.

New workplace harassment duties

The Government’s proposal to strengthen the employer duty to prevent sexual harassment, requiring organisations to take ‘all reasonable steps’ to prevent harassment in the workplace from October.

For many employers, this will mean reviewing whether existing policies, training and reporting mechanisms are fit-for-purpose.

Our Preventing sexual harassment in the workplace eLearning course helps raise awareness, reinforce expected behaviours and support compliance with evolving employer obligations.

Strengthening manager support

Employers that invest in clear policies, effective training, manager capability, expert support and early intervention are better placed to prevent issues escalating, strengthen compliance, improve decision-making and create a more positive workplace culture.