The AI Skills Gap Emerging Inside Australian Law Firms

people2people’s 2026 Market Report found that 43% of law firms currently offer AI and technology upskilling as an employee benefit or development opportunity.

That sits well below more traditional forms of professional development. 80% of law firms offer career development training, 76% provide association memberships and 74% provide access to industry publications.

The distinction is important.

The data does not suggest law firms are failing to invest in employee development generally. It suggests that AI-specific capability building is considerably less established than the traditional learning and development structures already operating across the profession.

With more than two-thirds of 2026 now behind us, the question for firms is becoming less theoretical: are their existing development programmes keeping pace with the skills their people will increasingly need?

Kim Padmore, WA Managing Director at people2people, said AI should increasingly be considered a workforce capability issue rather than solely a technology decision.

“Law firms already understand the importance of professional development. The challenge now is making sure that development evolves with the way legal work is changing. Giving people access to technology is one thing; making sure they understand how to use it effectively, appropriately and confidently is another.”

AI capability is becoming a people strategy

Across Australian employers more broadly, AI and digital skills have moved rapidly up the workforce agenda.  The 2026 Market Report found that 75% of employers planned to invest in AI-focused learning and development during 2026.

Of those employers:

• 13% were making significant commitments
• 41% were beginning their AI learning and development journey
• 21% were planning future investment
• 21% were not currently planning AI-focused learning and development

AI and digital upskilling was also identified as the second-highest workforce priority for 2026, cited by 51% of employers, behind productivity and performance at 58%.

That placed it ahead of attracting top talent at 47%, workforce planning at 45% and employee engagement at 41%.  These national figures measure planned investment across Australian employers generally, rather than law firms specifically. However, they demonstrate the broader direction of workforce planning.  AI adoption is no longer only a question for IT teams.  Within a law firm, leaders may need to consider how changing technology affects Lawyers, Legal Assistants, Paralegals, knowledge teams, finance, operations, business development and HR.

“The conversation around AI can become too focused on which platform a business is using,” Padmore said. “For employers, the bigger question is what capability their people need as the technology becomes part of everyday work.”

Technology alone will not solve the capability gap

The broader Australian findings also show why implementing AI is more complicated than simply introducing new tools.  Across employers generally, the leading barriers to AI implementation included:

• 64% – concerns about accuracy
• 63% – cybersecurity
• 46% – lack of in-house skills
• 45% – data quality
• 43% – system integration
• 38% – absence of AI policies
• 33% – regulatory uncertainty
• 29% – limited budget

For the legal sector, several of those issues carry obvious significance.  Accuracy, confidentiality, data handling, cybersecurity and governance are already fundamental considerations within legal work. AI introduces another layer to those responsibilities.  That means effective AI training needs to go beyond teaching employees how to generate better prompts or use a particular platform.  Employees also need to understand when technology should be used, what information can safely be provided to a system, how outputs should be checked and where human judgement must remain central.  Padmore said the national findings reinforce the importance of developing capability alongside adoption.

“If lack of internal skills is already creating difficulty for employers implementing AI, training cannot be treated as something that comes after the technology has been introduced. Capability and governance need to develop alongside the tools themselves.”

What should AI upskilling look like inside a law firm?

There is unlikely to be a single training model appropriate for every firm.  However, structured AI development should extend beyond a one-off presentation about emerging technology.  For law firms reviewing their approach, several areas deserve consideration.

AI literacy

Employees need a practical understanding of what AI can and cannot reliably do.  That includes recognising appropriate use cases, understanding limitations and knowing that outputs may require verification rather than being accepted at face value.

Risk and governance

Training should reflect the specific obligations of a legal workplace.  That may include confidentiality, cybersecurity, data handling, client information, internal policies and clear parameters around acceptable and prohibited uses of AI.

Practical capability

AI training is more useful when employees can connect it directly to their work.  Rather than focusing exclusively on broad discussions about the future of AI, firms should consider where technology is already changing workflows and where it could realistically create efficiency or alter responsibilities.

Critical judgement

The ability to use AI is not the same as the ability to assess it.  Employees need to understand when an output warrants further checking, when it should be escalated and when professional expertise must override the technology.

Role-specific development

A Partner, junior Lawyer and Legal Assistant are unlikely to use AI in exactly the same way.  Training should therefore reflect differences in responsibility, workflows, risk exposure and decision-making authority.

“A whole-of-firm introduction can be useful, but it should not be the end of the training,” Padmore said. “The most valuable development is likely to be role-specific and practical, because the risks and opportunities will look different depending on the work someone performs.”

What happens to junior development when the work changes?

One of the more significant workforce questions raised by AI is what happens to the work traditionally used to develop junior employees.  Across Australian employers generally, 60% expected AI to drive upskilling or reskilling during 2026, while 34% anticipated greater change management and 25% expected to redesign roles around AI.  A further 14% expected to hire fewer junior roles.

These figures do not relate specifically to law firms, but they raise an important question for the legal profession.  If AI increasingly performs or accelerates some of the routine work historically undertaken by junior employees, firms will need to consider how those employees continue developing the underlying skills and judgement required to progress.

Junior lawyers do not become experienced practitioners simply by occupying a role for a certain number of years. Development comes through exposure to matters, reviewing work, receiving feedback, making decisions and gradually taking on greater responsibility.  If technology changes parts of that pathway, firms may need to become more deliberate about how development occurs.

“Efficiency is valuable, but firms also need to think beyond the immediate task being automated,” Padmore said. “If technology removes some of the work through which junior employees traditionally learned, leaders need to be clear about what will replace that development experience.”  That is not an argument against AI adoption. It is a workforce-planning question that becomes increasingly important as roles evolve.

Development could also become a retention issue

AI capability is not only about preparing employees for changing work.  The broader Market Report identified a significant gap between how much employees value development and how important employers believe it is to retention.

68% of employees identified learning and skill development as important to retention, while employers estimated that it mattered to only 21%.

That disconnect deserves attention in a legal market where experienced talent remains difficult to secure.  Within the legal section of the report:

• 39% of firms struggled to recruit Senior Associates
• 30% struggled to recruit Legal Assistants and Secretaries
• 27% struggled to recruit Lawyers

When key professionals remain difficult to attract, development opportunities may become part of a broader retention and employee-value proposition.  For firms, the argument should therefore not simply be that employees need AI training because technology is advancing.  Structured development may increasingly influence both the capability firms retain internally and the attractiveness of the firm to people considering their next career move.  Padmore said employers should avoid treating learning and development as separate from recruitment and retention strategy.

“Candidates do not only assess the role they can do today. Experienced professionals increasingly want to understand how a firm will support their development and keep their skills relevant. That becomes particularly important when the way work is performed is changing quickly.”

What law-firm leaders should be asking now

The 43% of law firms currently offering AI and technology upskilling does not necessarily mean the remaining firms are not using AI or investing in technology.  But it does suggest that structured development around those technologies is not yet standard across the profession.  With national employers increasing their focus on AI capability during 2026, law-firm leaders should now be asking:

• Which roles within the firm are already using AI?
• Where could AI materially change existing workflows?
• What skills will employees require as those workflows evolve?
• Which uses of AI are acceptable, restricted or prohibited?
• Are managers equipped to supervise AI-enabled work?
• How will junior employees develop if routine tasks change?
• Does existing learning and development address AI capability in a practical way?
• Is AI being considered as part of broader workforce and succession planning?

These are not purely technology questions.  They are questions about capability, management, risk, career development and the future structure of the workforce.

The competitive advantage may ultimately be capability

Australian law firms already invest heavily in professional development.  Four in five provide career development training, demonstrating that learning is firmly embedded across much of the sector.

What appears less established is the next layer of that development.  Only 43% currently offer AI and technology upskilling, at a time when AI and digital capability has become one of the highest workforce priorities across Australian employers generally.  The figure does not prove that law firms are behind on AI adoption. Nor does it suggest every firm should rush to introduce new technology.  What it does show is that structured AI and technology development is not yet standard across the profession.  As firms move through the remainder of 2026 and begin planning their workforce requirements for 2027, the competitive question may become less about which firm has access to the newest technology and more about which firm has prepared its people to use it effectively.

As Padmore explains:

“Technology can be purchased relatively quickly. Building the judgement, confidence and capability required to use it well takes much longer. That is why the firms thinking about their people now are likely to be better prepared for whatever comes next.”