Microsoft 365 Billing Changes: What You Need to Know

Starting March 1st, 2022, Microsoft is releasing an updated program that changes how purchasing Microsoft 365 licenses will work. At the same time, some products are also increasing in price. Microsoft has not made these changes easy to understand, so here are the basics of what you need to know.

Starting next month, Microsoft is increasing prices in two ways. First, they will increase prices on some of their products. Second, they will charge a 20% fee for licenses purchased monthly. 

Price increases for Microsoft 365

The following products, including Business basic and E3 products, will be increasing in cost between 12 and 15%. The chart below shows the increase in prices. 

In addition to the price changes on these products, Microsoft will make price adjustments for nearly all customers based on how you choose to buy your licenses going forward: monthly or annually.

Additional fee for licenses purchased monthly

Changes are coming across the board to all Microsoft licenses for all products, including those products not listed in the chart above because they are not increasing in price. Starting in March, you must decide how you will purchase licenses. The options are to enter into a yearly agreement or to purchase licenses monthly. Licenses that are purchased monthly are charged a 20% fee by Microsoft.

Please note that the additional 20% fee for monthly licenses does not apply to nonprofit or education organizations. 

Example: Decision process for Microsoft 365 licensing

A business owner currently purchases Business Standard licenses (one of the products that are not seeing a price increase) for their team, paying $12.50 per license per month. If that business owner terminates an employee, that employee's license can be returned for a prorated credit of the unused portion of the month.

Under the new pricing that starts March 1st, this business owner has multiple options.

First, if they choose to continue with monthly payments they will begin paying $15.00 per month for each license. With the monthly purchase option, they still will be able to have a prorated amount of an unused license returned. 

Next, if the owner prefers, they do have the option to commit to one year for each license, allowing them to continue to pay $12.50 per month as they are currently. However, if a license is purchased for an employee under the one-year commitment and that employee does not stay the full year, a prorated credit for the unused portion of the year will no longer be offered. The business owner has committed to a full year and will continue paying for the term of the commitment.

Finally, if the business owner has temporary employees, then the best option may be to mix and match commitments. For year-round employees, yearly license agreements make sense. However,  it makes sense to pay a few months at $15 per month for a seasonal employee than to commit to a full year at $12.50 per month.

How to lock in your current Microsoft 365 license price

If your Microsoft 365 licenses are currently managed by Woodard, you should have received this information via email along with a link to book an appointment with Woodard Consulting Group.

If your licenses are not being managed by Woodard, you should consult with your Microsoft 365 provider before March 1st about the above information.

If you prefer that your licenses be managed by Woodard, please schedule a meeting with our team.

Decisions you need to make prior to March 1, 2022

If your organization uses one of the six products shown in the chart above that will have an increase in license price, Woodard can help you lock in your current price with a one-year commitment to your license. This means that you will not see a price increase on your licenses until 2023. You will also be able to add additional licenses for the same product at the current (and cheaper) rate over the next year. If for any reason you need to change products or add a license that is for a different product, those licenses would be subject to the cost increase.

If your organization uses one of the products that are not subject to the price increase, you still have a decision to make. Woodard is happy to work through the decision process with you. You will need to decide if you want to make an annual commitment for your current licenses to continue with your current pricing - or - if you will pay the 20% fee to have the flexibility to cancel your licenses whenever you need.