Why 2026 is a critical moment for Employee Engagement

As organisations build their 2026 people strategies, they are having to balance multiple tension points and challenges. This presents a pivotal moment for organisations and leaders - they either need to lean into engagement more, or risk engagement dropping further and further down the agenda.

Yes, budgets are being cut and hybrid working requires leaders to adapt how they lead, both of which impacting employee engagement, but it is the collision of three other forces that are really going to shape the year ahead:

• AI accelerating faster than human capability
  
• Critical skills gaps emerging across the workforce
  
• Managers are the ‘squeezed middle’

Together, these forces will create a clear split: organisations who build people-centred, manager-enabled cultures, and those who choose to simply focus on productivity which will inevitably lead to a reduction in engagement and retention.

Below, we break down why.

The three forces

1. AI Is Advancing Faster Than Organisations Can Absorb It

Gartner’s latest forecast shows dramatic acceleration. AI is reshaping workflows, redistributing tasks and shifting the skills required in almost every role:

• Adoption of generative-AI tools has jumped from 19% to 61% in under two years.
  

This is structural transformation.

The problem: technology is moving faster than people. Without the right support and training, AI-driven change creates uncertainty, fear and frustration. It leads to questions like “what does this mean for my role?”. 

The organisations falling behind in 2026 will be the ones who assume their people will “adapt naturally”. They won’t. If you want to redesign your organisation around AI then you need to invest in training your people to use it effectively.  

2. The Skills Gap Is Widening

The UK is now entering a period of acute capability pressure:

• The WEF’s 2025 Future of Jobs Report shows that employers expect major shifts in core job skills by 2030, as technology rapidly reshapes work
  
• 27% of all job vacancies are skill-shortage vacancies (The UK Employer Skills Survey, 2024)
  
• Sector analysis shows skill-shortage vacancy rates in digital and tech roles are among the highest in the economy (UK Government, 2025)

Inpulse data shows that development opportunities and career advancement are two of the top reasons why people are looking to leave their current organisation. Therefore, we know learning and development is important to engaging and retaining people.

This shortage in core skills means organisations need to rely on internal promotions, rather than seeking to hire externally, otherwise they risk not closing the skills gap and capabilities they require. This presents a win-win opportunity for both the organisation and the employee: the organisation develops the skills they need, whilst the employee has the opportunity to develop and grow, improving employee engagement and retention.

3. The Manager Bottleneck: Where Strategy Succeeds, Or Fails

It’s no secret that managers are a key driver to employee engagement. In fact, at Inpulse we say there is no silver bullet to employee engagement but if there was then the closer thing would be the line manager.

However, managers are currently under intense pressure and are feeling the squeeze. They are now expected to:

• Guide teams through technological advancements
• Guide teams through change and uncertainty
• Support personal development of team members
• Improve team performance and productivity
• Support their team members’ wellbeing
• Navigate hybrid inequality
• And still deliver business results

Managers are overwhelmed, undertrained and under-supported. 75% of business managers feel overwhelmed by how much their job responsibilities have grown, 73% say they lack sufficient skills or support to lead organisational change (Gartner) and 33% of managers feel out of their depth supporting their team with mental health concerns (Mental Health First Aid England).

This matters, because when managers are overwhelmed and under-equipped, the impact shows up immediately in engagement: organisations that invest in people-centred manager support reach 77% engagement those that don’t fall to just 45% (NTU).

This means organisations need to rethink the role of the line manager and their organisation design - its not sustainable at the current rate. Managers are burning out and its not only affecting their own wellbeing, its impacting employee engagement.

Why This All Converges in 2026

We have already seen this trend clearly in 2025, and this will only heighten further in 2026 if organisations don’t act.

Here’s why next year is the pivot:

• AI will be embedded, not experimental. Employees will no longer be learning about AI, they’ll be working with it.
• Skills demands will outpace traditional L&D Reskilling needs will become continuous, not episodic.
• Managers will either rise, or break. Those with the capacity and equipped to lead people through change will accelerate engagement, capability and culture.
  Those without support will struggle to maintain performance and engagement.

What High-Performing Organisations Will Do Differently

To stay on the winning side of the divide, organisations will need to:

A. Equip managers to lead in a people-centred way

Not with toolkits. Not with generic leadership courses. But with real-time insight, emotional-intelligence support and practical coaching to navigate change.

B. Build a reskilling strategy that’s manager-led, not HR-led

Managers must help employees apply new skills to real work, or training becomes shelfware. Training should involve skills around AI and other technologies.

C. Use emotional and behavioural insights to spot risks early

The organisations who act early on emotional signals, not just survey scores, will catch capability, culture and engagement issues before they turn into performance or retention problems.

The Point: 2026 Will Reward Organisations Who Put People Before Process

AI, reskilling alone, even budget size, will not determine who wins.

The winners will be the organisations that recognise this simple truth: Technology transforms work. People, especially managers, determine whether that transformation succeeds.

Those that invest in people-centred leadership, manager support and real workforce insight will see engagement, capability and culture grow.

Those that don’t will see the engagement divide from the wrong side.

Missed our webinar? Catch up now to uncover the data, insight and tactics every HR leader needs to effectively support managers, so they can drive performance in 2026: The Great Squeeze: How to Support Line Managers (Q4 and Beyond)