Managing people in 2026: why the stakes have never been higher

The rules and risks around managing people are shifting fast. Over the next year, a combination of legal reform, regulatory scrutiny and changing employee expectations will significantly raise the stakes on everyday people management across the financial services sector. Even experienced managers will feel this shift. For organisations that have not yet invested meaningfully in management capability, the window to prepare is narrowing.

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This is not about compliance for its own sake. It reflects the reality that how managers behave, what they say, what they write and how they handle difficult situations now carries greater consequences for your people, your culture and your organisation's legal and reputational standing. For example, with the FCA's sharpened focus on non-financial misconduct (NFM), and its expectations under the Conduct Rules (COCON) and FIT, the behavioural standards required of managers have never been clearer or more critical.

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Here are five forces reshaping people risk and what leading organisations are doing about them.

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1. The Employment Rights Act 2026 is raising the legal baseline

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The Employment Rights Act 2026 introduces reforms that fundamentally change how people issues must be managed. For recruits from July 2027, employees will qualify for unfair dismissal rights after just six months, and compensation will no longer be capped. This significantly reduces the scope for informal or delayed management of performance or conduct concerns. Early, well-handled and well-documented conversations will become essential.
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Probation management will be under particular scrutiny. Organisations that relied on longer qualifying periods to resolve issues later will now need a more structured and rigorous approach from day one.
From October 2026, employers must also take "all reasonable steps" to prevent harassment, including harassment by third parties. This is a materially higher bar that demands proactive prevention from all managers – not just HR teams.
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For example, for financial services firms, the regulatory overlay heightens the stakes further. The FCA's guidance on non-financial misconduct makes clear that behaviours such as bullying or inappropriate conduct can breach conduct rules and affect fitness and propriety. People management is now as much a regulatory matter as an HR one.

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2. Workplace conflict is escalating faster than most organisations realise

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‍Workplace conflict has always had a cost. What has changed is how quickly issues escalate – often before a manager is even aware something is wrong.
Employees who might previously have raised a concern informally are now consulting AI tools first. Many of these tools categorise behaviour as bullying or harassment without the necessary context, produce grievance templates within seconds and encourage formal action. Issues that could have been resolved through a conversation are becoming formal disputes before a manager has had any opportunity to intervene.

The answer is not to dismiss this dynamic, but to strengthen the conditions that allow early resolution: psychological safety, skilled managers and timely, confident intervention. Organisations that build this capability reduce disputes, lower legal costs, strengthen culture – and crucially, regain control of the narrative before an algorithm sets it for them.

3. Managers need practical difficult conversations training – not just a legal and regulatory briefing

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Expectations of managers have grown materially. They are expected to manage performance, address conduct issues, support wellbeing, navigate hybrid working and model organisational culture, often with limited support and under significant pressure.
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Most managers are not failing because they do not care. They simply have not been given the practical skills, frameworks and confidence they need. A manager who avoids a challenging conversation is not necessarily disengaged – they may never have been shown how to handle it well.
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Legal and regulatory knowledge is necessary. However it is practical capability – what a manager actually says and does in difficult moments – that determines whether issues escalate, resolve or, in some cases, create regulatory exposure. The ability to give clear, constructive feedback, intervene early and handle sensitive conversations with honesty and care is not a soft skill. It is a core cultural and commercial capability.

4. The bar for workplace culture and people risk has moved

‍Organisations have always known that culture matters. What has changed is the standard they are being held to.
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Regulators and tribunals are increasingly focused on what an organisation had in place before an incident – not simply how it responded afterwards. For example, the FCA's approach to non-financial misconduct, the statutory duty to take "all reasonable steps" to prevent harassment and greater scrutiny of speak-up frameworks all reflect the same expectation: that workplace culture and people risk must be built intentionally, not asserted retrospectively.
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The question is no longer whether you responded well to a complaint, but whether you created the conditions in which that complaint was less likely to arise at all.

‍5. Psychological safety is now a strategic necessity

‍Awareness of employment rights has never been higher. Information is more accessible than ever. AI has lowered the barrier to formal action. Younger generations, in particular, enter the workplace with clear expectations of fairness and transparency.
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This is not a threat. It is a signal. Organisations that build genuine psychological safety – where people feel able to raise concerns early and where managers respond well – resolve issues faster, avoid unnecessary disputes and retain talent. Those relying on people not knowing their options are operating on borrowed time.
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The organisations that will navigate the next two years most effectively will not simply be those with strong legal advice. They will be those whose managers have the day-to-day behavioural capability to handle people issues expertly and consistently.

‍What this means in practice

‍Behavioural capability, not knowledge alone, is what changes outcomes.
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Building management capability is not a one-off intervention. It is a long-term commitment to developing the confidence, skill and cultural awareness that make good people management possible.

The most effective organisations are:

• equipping managers to have early, fair and confident difficult conversations
• supporting leaders to understand their legal, regulatory and cultural responsibilities
• setting clear behavioural expectations
• embedding skills that influence not just what managers know, but what they do

The stakes have never been higher. Organisations that act now will be better placed legally, culturally and commercially than those that wait.

Byrne Dean helps organisations build management capability, navigate workplace conflict and manage people risk. To find out more about our manager skills training and workplace behaviour programmes – or to speak to our team – please get in touch.

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