If your invoice pointed you here, welcome. This page explains Microsoft 365 licensing in plain English: subscriptions, licences, assignments and billing terms, so the lines on your invoice make sense and licensing decisions feel straightforward.
Most licensing questions come down to one distinction. The subscription is what your organisation has purchased from Microsoft. The assignment is which person is currently using it.
Say your organisation holds 20 Microsoft 365 Business Premium licences on an annual term, and one staff member leaves. We can usually remove the licence from their account straight away, and their access ends. The subscription itself carries on, held by your organisation and available to reassign, until it reaches its renewal date. That is why a licence can disappear from a user while still appearing on your invoice.
It works in your favour too. When a new person starts and a spare licence is sitting unassigned, we simply assign it to them. Nothing new is purchased, and nothing changes on your invoice.
Tenant, subscription, licence and assignment tend to get used interchangeably in conversation, but each means something different. Knowing which layer a question belongs to usually answers it.
Your organisation’s Microsoft 365 environment: users, mailboxes, Teams, SharePoint, OneDrive and security settings. Think of it as the building. It belongs to your organisation, whoever supplies the licences or administers it.
The commercial purchase from Microsoft, such as 20 Business Premium seats on an annual term. The subscription carries the quantity, the price, the term and the renewal date, and it is what creates the billing.
Individual seats within a subscription. A subscription with a quantity of 20 gives you 20 licences to allocate. Some may be assigned and some held spare, and Microsoft bills for all of them either way.
The link between a licence and a person. Assigning a licence gives that person access to the product, and removing it takes that access away. Changing an assignment does not change what your organisation has purchased.
Almost every licensing and billing question comes back to these four layers, and working out which one you are dealing with is usually most of the answer.
Every subscription has a commitment term, and the term sets the balance between flexibility and price. One thing catches people out: billing frequency is separate from the commitment. An annual commitment can be billed monthly, and it is still an annual commitment. The invoice simply arrives in twelve smaller pieces.
The most flexible option. Quantities can go up or down from one month to the next, which suits contractors, seasonal staff and anything short term. That flexibility comes at a higher price per licence.
Better value for permanent staff, priced lower than monthly in exchange for a twelve-month commitment. Quantities can be increased at any time, but generally cannot be reduced until the renewal date. Microsoft allows a short cancellation window of seven calendar days from purchase or renewal; after that, the term runs through to its renewal date.
A newer option from Microsoft, available on some subscriptions, for organisations wanting longer price certainty. The same principle as an annual term, over a longer horizon.
Microsoft invoices are predictable once you know the handful of things that shape them. These four prompt the most questions.
Add a licence partway through a billing period and the first charge covers only the days remaining in that period. It can look like an odd amount, but it simply means you were billed from the day the licence existed and not before.
Where practical, new licences are aligned to your existing renewal date so everything renews together. The first invoice line for an added licence may cover an unusual stretch of time for that reason, and every renewal after that lands on one tidy date.
An unassigned licence still appears on your invoice, because your organisation still holds it. Spare licences are normal, especially with new starters on the way, and they are exactly what makes onboarding a five-minute job.
Seeing an invoice every month does not mean the commitment is monthly. Annual subscriptions are often billed monthly to help with cash flow, and the term still runs through to its renewal date.
When a staff member leaves or changes role, their licence can usually be reassigned to whoever takes over. That is a normal, sensible use of what you have already purchased, and we handle it as part of everyday administration.
What Microsoft’s terms do not allow is treating one licence as a floating seat shared between several people. As a rule of thumb, Microsoft expects a licence to stay with a person for at least 90 days before it moves again, with sensible exceptions such as covering an absence. A licence following a role from one permanent staff member to the next is fine. Rotating one licence around a team week by week is not.
The same thinking applies to shared or generic accounts. Giving several people the password to one licensed account can look economical, but it sits outside Microsoft’s licensing terms, and it removes the security basics that protect you, such as knowing who did what and being able to close one person’s access the day they leave. Where a genuinely shared mailbox is needed, Microsoft has proper ways to do that, and we are happy to set them up.
Moving Microsoft licensing between providers is far simpler than most people expect, because the licensing relationship sits alongside your environment rather than containing it. Your tenant, users, email, Teams, SharePoint and OneDrive all stay exactly where they are. What changes is who supplies the subscriptions, who helps manage them and who sends the invoice.
Microsoft supports these moves directly. Bringing existing licensing to IT Works usually means establishing a partner relationship and transferring the subscriptions, with both providers involved and nothing rebuilt. The same applies in the other direction, and we think that matters: a good provider is chosen, not locked in.
One thing does carry over: any commitment terms already in place. An annual subscription with eight months left to run still has eight months to run after a transfer, because the commitment belongs to the Microsoft subscription rather than to the provider.
Microsoft decides the licensing terms: commitment periods, cancellation windows, pricing and use rights. Those terms apply whichever provider you buy through, and no provider can override them. Our job is to make them easy to live with.
We supply subscriptions, keep an eye on renewal dates and talk with you before a term renews, so quantities match your actual headcount and nothing renews unnoticed.
Assigning licences to new starters, removing them for leavers, reassigning them where roles change, and keeping spare capacity sensible.
Which products fit each role, when an annual term beats monthly, and how to time changes around your renewal date. Plain recommendations, rather than a portal to figure out on your own.
This page is practical guidance rather than legal advice. Microsoft’s published terms are the authoritative source and can change over time. The current versions are available in the Microsoft Product Terms and Microsoft’s cancellation policy documentation.
Straight answers to the lines people ask about most. If yours is not here, send it through.
That is a pro-rata charge. When a licence is added part-way through a billing period, Microsoft charges only for the days remaining in that period, so the first invoice shows a partial amount and the next returns to the full figure.
The term and the payment schedule are separate. An annual term fixes the price and the commitment for twelve months, and Microsoft allows that commitment to be paid in monthly instalments, which is what appears on your invoice.
Yes, within seven calendar days of purchase or renewal under Microsoft’s New Commerce Experience. After that window the licence runs to the end of its term, which is why we confirm the licence type and term with you before adding anything.
Unassigned licences are often deliberate, for example held for a new starter or kept through a short vacancy. If one has no plan attached, ask us about it. Right-sizing unassigned licences is one of the quickest savings on a Microsoft 365 invoice.
It can be reassigned. Microsoft’s rule of thumb is that a licence stays with one person for around 90 days, but reassigning a departing person’s licence to their replacement is normal and expected, and IT Works handles that as part of offboarding.
Yes. Microsoft 365 subscriptions and your data belong to your organisation, not to your provider, and they can be transferred to a new Microsoft partner. A good provider is chosen, not locked in, and IT Works works on that basis.
Send it through. We will tell you exactly what the line is, why it is there and whether there is a better way to set things up. No pitch, no pressure.
