Most businesses never stop to check how their Microsoft 365 is billed — only that the invoice turns up. But there’s a catch hiding in plain sight: if you’re paying monthly rather than committing for the year, Microsoft charges you a premium for the flexibility — typically around 20% more. Across a full team, that adds up fast.
Why monthly costs more
Under Microsoft’s licensing model, you can pay for 365 in one of two ways:
- Annual commitment — you lock in a price for 12 months and pay the lowest rate.
- Monthly (flexible) — you can add or drop seats month to month, but you pay roughly 20% more for the privilege.
Flexibility is genuinely useful if your headcount swings a lot. But plenty of businesses sit on monthly billing by accident — and quietly pay the premium on every seat, every month, for staff who aren’t going anywhere.
Work out what it’s costing you
Enter how many of each licence you have below, and we’ll show the difference between an annual commitment and monthly billing over a year.
Prices shown are indicative list rates for illustration only — your actual prices depend on your specific agreement.
How to stop overpaying
If those numbers made you wince, the fix is usually straightforward:
- Move stable seats onto an annual commitment to drop the premium straight away.
- Keep a small buffer on monthly only for the roles where your headcount genuinely flexes.
- Review it every year so renewals never default to the more expensive option.
Try the smart mix
The clever move isn’t putting everyone on annual — it’s committing your stable seats for the lower price while keeping a small handful on monthly, so you can add or drop people without penalty. This calculator shows what that balance costs, and how much you still save versus putting the whole team on monthly.
It’s exactly the kind of housekeeping we handle for our clients in the background — and it’s often the easiest saving on the whole IT bill. For more on the timing side of this, see our guide on the Microsoft 365 price rise from 1 July.