How does Microsoft 365 licensing work?

Licenses are per user

A business buys a subscription with a number of licenses and assigns one to each person's account. People in one company can hold different plans. Our Microsoft guide covers what the products do.

The three Business plans

Most small and mid-size companies only need to choose between three plans. Business Basic gives each person business email, OneDrive, SharePoint and the web and mobile versions of Word, Excel, PowerPoint and Outlook. Business Standard adds the desktop apps. Business Premium adds device management and security, so the company can control and protect the laptops its staff sign in on.

The Business plans cover up to 300 users. Microsoft changes what each plan includes from time to time, so check its comparison page, linked below, before you buy.

Shared mailboxes

A shared mailbox such as info@ or support@ needs no license while it holds under 50 GB. Each person who opens it needs their own licensed mailbox.

When someone leaves

When a license is removed from a user, Microsoft holds that person's mail for 30 days and then deletes it. To keep a departing employee's mail, convert the mailbox to a shared mailbox while the license is still assigned. If it is under 50 GB, the license can then be removed. Move any OneDrive files you need to keep before the license comes off.

Monthly versus annual

Licenses can be bought on a monthly or an annual term. Seats can be added at any time. On an annual term the count cannot be reduced until renewal, apart from a short window after purchase. A monthly term costs more per seat but suits seats that come and go. An annual term suits steady staff.

Common mistakes we see

• Paying for desktop apps nobody installed: people who only use Outlook and Teams in a browser sit on Business Standard when Business Basic covers them.
• Leaving licenses on departed staff: sign-in is blocked, but the license stays assigned and billed.
• Removing a license before converting the mailbox: the 30-day hold starts, and then the mail is deleted.
• Putting seasonal staff on an annual term: those seats cannot be dropped until renewal.

How KawaConnect handles licensing

KawaConnect is an official Microsoft reseller. Businesses buy Microsoft 365 licenses through us on one invoice with their IT support. We check who needs which plan, remove unused licenses and move users between plans. We assign licenses at onboarding and reclaim them at offboarding.

Start at our Microsoft reseller page. Tenant work is under Microsoft 365 support. For PCs, read the Windows licensing guide.

Learn more

• Compare Microsoft 365 business plansMicrosoft's side-by-side table of the Business plans, for anyone choosing between them.
• Understand subscriptions and licenses in Microsoft 365 for businessHow subscriptions, licenses and user accounts relate, written for tenant administrators.
• Microsoft 365 on WikipediaBackground on the product family.